Author Archives: Irene Martinez Canorea

The Raw Steels MMI (Monthly Metals Index) increased 7% this month, reaching 92 points. This reading is the highest since June 2012. The skyrocketing MMI came as a result of sharp increases in steel prices, the Section 232 release and President Trump’s comments regarding imposition of a 25% steel tariff.

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Steel price momentum strengthened in February, moving sharply up for all forms of steel. Steel prices have reached more than three-year highs. However, some forms of steel are now even higher. Domestic HRC prices, currently at $762/st, haven’t seen these levels since June 2011.

Source: MetalMiner data from MetalMiner IndX(™)

Based on the long-term analysis, steel prices will likely continue to rise this year. Even if the seasonality for steel prices returns in Q2, steel price momentum appears strong.

Let’s Talk Spreads

Section 232 — and the price uncertainty it has unleashed — requires metal-buying organizations to pay more attention to what is called the spread. The spread refers to the price delta between domestic HRC and CRC prices and the spread of each with Chinese prices. Analyzing and understanding these spreads helps to determine by how much mills could increase steel prices (as well as how high they can go).

So, let’s take a look at some examples.

The Domestic HRC-CRC Spread

As with all the other forms of steel, CRC prices also increased again this month. The upward movement remains strong, even if the amount of the increases — and therefore the slope of the upward trend — appears softer (less sharp).

This does not come as a surprise, as the spread between CRC and HRC prices was extremely high. Now, the spread between CRC and HRC prices has returned closer to historical levels.

Source: MetalMiner data from MetalMiner IndX(™)

It is important to understand where the spread comes from. CRC (cold rolled coil) is HRC (hot rolled coil) plus one additional rolling process. As per the chart above, from 2011 to 2016 the price spread between the two has been around $100/st (plus or minus).

At the end of 2016, buying organizations could see a $201/st spread between HRC and CRC prices. The spread started to decline at the beginning of 2017, and has increased further in 2018. The domestic spread is currently at $124/st, much closer to its historical levels. (MetalMiner covered domestic spreads in our free Annual Outlook Report published in October 2017.)

A higher spread creates better margins for domestic mills. From a buying perspective, the previous anomaly only helps a buying organization that has not contracted for all of its CRC purchases (and can play a price arbitrage game by purchasing HRC and paying to roll it to CRC).

Chinese Spread

Chinese demand has always been positioned as one of the main drivers of global steel prices. Check out the correlation in the graph below between the domestic HRC and Chinese HRC prices. When Chinese prices increase, U.S. domestic prices tend to increase, too. The same is usually true when prices fall.

Source: MetalMiner data from MetalMiner IndX(™)

Even if short-term events (such as the release of the Section 232 report or President Trump’s comments) add support to steel prices in one country, the general trends tend to correlate.

This is exactly what happened with U.S. HRC prices.

The latest increase in HRC prices here in the U.S. came as a result of the Section 232 uncertainty and the announcement of the tariff. Not surprisingly, so far this month, HRC prices in China increased after trading sideways last month. Therefore, watching price reactions in China makes sense in order to better forecast price trends in the U.S.

An  analysis of the spread between Chinese and U.S. prices allows buying organizations to better understand the price impacts the tariffs could have on domestic steel prices. In other words, the spread tells us how much domestic prices could rise before it is better to import steel from China.

What This Means for Industrial Buyers

The strong upward momentum for steel, together with the Section 232 outcome and President Trump’s comments regarding steel tariffs, drove steel prices to more than three-year highs. Buying organizations who have concerns about the Section 232 impact on the steel industry may want to read our Section 232 Report.

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This afternoon, President Trump signed a proclamation to impose the 25% tariff on imported steel and 10% tariff on imported aluminum products, both of which were announced on March 1. The tariffs will go into effect in 15 days, and will exclude Canada and Mexico for the moment, until NAFTA negotiations finish, according to several news sources.

Other countries such as China, South Korea, Japan, Germany and Brazil may be hit by these tariffs, according to the New York Times. However, the President claimed they would be flexible when imposing the tariffs, which were implemented in the wake of the Commerce Department’s Section 232 investigation.

We’re going to be very flexible,” Mr. Trump said. “At the same time, we have some friends and some enemies where we have been tremendously taken advantage of over the years.”

The President also said that the tariff order may exclude some additional countries and would give him the authority to raise or lower levies on a country-by-country basis and add or take countries off the list as he deems fit.

President Trump extolled the benefits of the tariff order and the relevance of the U.S. as a primary metal producer. The recent announcements of steel mill openings made since the President’s first comments about the tariffs on March 1 were also highlighted at the White House event.

He mentioned the United States’ current relationship with China, characterizing it as a “great” one, but noting that “something has to be done about the trade deficit,” according to the Guardian. The China question has been at the center of the tariff debate from the beginning, with that country’s metal production overcapacity and questionable trade practices spurring President Trump’s campaign promise.

Not surprisingly, organizations representing upstream steel and aluminum industries saw the results differently than those representing downstream players.

“The president’s commitment to addressing the steel crisis is already producing benefits in Granite City, Ill., where U.S. Steel will be restarting one of the blast furnaces that has been idle since December 2015 due to global excess steel capacity and unfairly traded steel imports,” said Tom Gibson, president and CEO of AISI, in a statement. “With the signing today, the steel industry can be on track to maintain our essential contributions to national security and critical infrastructure like transportation, public health and safety, energy and the power grid – all of which rely heavily on steel.”

Other sectors of the aluminum industry were opposed. For example, the Beer Institute, on behalf of U.S. brewers, implored the President to exempt aluminum can-sheet imports, making an argument based on job loss and overall economic loss, in a press release.

“We have not yet seen the order formalizing these tariffs,” said the Institute’s president and CEO Jim McGreevy, in the statement. “If possible, the Beer Institute will work with our member companies to file an exclusion request with the Department of Commerce. It is critical that if the president and his administration choose to impose any tariffs, they be carefully targeted only to protect America’s national security interests.”

For more in-depth scenario-based analysis, including buying strategies, check out MetalMiner’s report, “Section 232 Impact by Scenario on Aluminum, Stainless Steel and Steel Prices.

The Copper MMI (Monthly Metals Index) traded lower this month, falling two points to 87 for our March reading.

The Copper MMI fell for the second consecutive month, after the sharp increase in prices at the end of last year. In February, LME copper prices fell by 3.5%.

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The LME copper short-term downtrend does not seem that bearish when looking at the two-year chart. Copper prices retraced this month again, but still hold above the blue dotted line, which represents the trend line (prices below that line might indicate a change in trend). In December, copper prices skyrocketed and breached the $7,000/st level, confirming long-term bullish sentiment remains intact.

Source: MetalMiner analysis of FastMarkets

Meanwhile, this month, a stronger U.S. dollar added downward pressure to commodities and industrial metals. Analysts also claim the latest “bearish” downtrend occurred due to increasing LME stocks.

MetalMiner analyzes copper supply from two different perspectives: copper stocks and global copper supply.

Copper Stocks

Copper stocks at the major metal exchanges totaled 537,722 tons at the end of November 2017, reflecting a decrease of 0.3% from stocks in December 2016. In particular, LME stocks fell by 41%, while SHFE stocks increased by 12% in 2017.

However, 2018 has come with some recoveries for LME copper stocks.

Copper stocks are at a current 324,900 tons. This means LME copper stocks are 13,075 tons higher than at the beginning of 2017, and 85,500 tons higher than at the beginning of 2016.These numbers show some recovery for LME copper stocks; this information has likely fueled trading sentiment this month.

CME stocks also increased at the beginning of the year. In 2015, CME stocks were just at 20,000 tons, compared to the current 209,000-ton level. Both of these numbers (CME and LME stock levels) have moved trader sentiment.

Global Copper Supply

The Indonesian unit of Freeport-McMoran’s copper mine and Amman Mineral Nusa Tenggara (AMNT) are waiting for last-minute ministry approvals to their application for an extension to continue with copper concentrate exports. Freeport’s export order for the Grasberg mine expires this month (copper mines have to reapply for export licenses every year).

Freeport had an export quota of 1.1 million tons of copper ore concentrate ending February 2018. Exports could stop this month, but mine production could continue.

Meanwhile, the Chinese Ministry of Environmental Protection has tightened the “allowable” impurities levels further. Therefore, instead of importing scrap, China now imports unwrought copper for downstream production.

Copper supply also looks threatened in Chile and Peru, particularly if workers go on strike since labor contracts expire soon. The powerful labor union at the Escondida copper mine cast doubt on the chances of starting talks on a new labor agreement with the company before formal negotiations commence in June.

Global copper supply still shows some uncertainty with possible copper supply shortages coming in 2018. Therefore, buying organizations may want to understand the global picture rather than just considering the trend based on stock levels and actual copper supply.

What This Means for Industrial Buyers

In February, buying organizations had some opportunities to buy some volume. As long as copper prices remain bullish, buying organizations may want to buy on the dips. For those who want to understand how to reduce risks, take a free trial now to the MetalMiner Monthly Outlook.

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After last month’s increase, the March Aluminum MMI (Monthly Metals Index) fell two points for this month’s reading. A weaker LME aluminum price led to the retracement. The current Aluminum MMI index stands at 97 points, 2% lower than in February.

LME aluminum price momentum slowed this month. Despite the price retracement, trading volumes still support the current uptrend. The long-term uptrend remains in place.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

Source: MetalMiner analysis of FastMarkets

Domestic Aluminum Market

February brought much uncertainty to the domestic aluminum market with the release of the Trump administration’s Section 232 reports and recommendations vis-a-vis aluminum and steel imports.  That release, together with President Trump’s announcement last Thursday of a 10% aluminum tariff on all imports have activated price warning systems for all aluminum and aluminum products.

LME aluminum reacted to the news, increasing only slightly.

Additional information about Trump’s announcement, combined with specific buying strategies, can be found in the MetalMiner team’s Section 232 Investigation Impact Report.

On top of that, the U.S. Department of Commerce announced its final determination on the Chinese aluminum foil import case initiated in March 2017. The aluminum foil investigation includes all Chinese aluminum imports, and the anti-dumping margins vary from 48.64 to 106.09%, while the countervailing margins vary in the 17.14-80.97% range. This case may also add some support for LME aluminum prices in the short term.

MW Aluminum Premiums on the Rise

U.S. Midwest aluminum premiums moved again at the beginning of March and are currently trading at $0.16/pound. The U.S. Midwest Premium has now reached the same levels from March 2015; the pace of the increases appears to have accelerated since the Section 232 report release.

Source: MetalMiner data from MetalMiner IndX(™)

The Section 232 outcome and President Trump’s comments around possible import remediation measures have caused increased volatility in the U.S. Midwest premium.

What This Means for Industrial Buyers

LME aluminum price retracement may give buying organizations a good opportunity to buy, as prices may increase again.

In bullish markets, buying organizations still have many opportunities to forward buy. Therefore, adapting the right buying strategy becomes crucial to reducing risks.

Given the ongoing uncertainty around aluminum and aluminum products, buying organizations may want to read MetalMiner’s Section 232 special coverage.

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Actual Aluminum Prices and Trends

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(Editor’s Note: In case you missed the previous installments of this series, check out Part 1 and Part 2.)

What About the Impact on U.S. Production?

The U.S. Department of Commerce. qingwa/Adobe Stock

First, the recommendations from the Department of Commerce apply to both primary (or upstream) and downstream production.

The upstream production refers to unwrought production, while downstream production consists of processing aluminum into semi-finished aluminum goods (such as rods, bar, sheets, plates, castings, forging and extrusions). The U.S. remains remains the second-largest aluminum producer, just behind  China.

Section 232 buying strategies – download MetalMiner’s Section 232 Investigation Impact Report today!

The main objective of the actions proposed by the Department of Commerce focused on downstream production. As previously stated, the Section 232 outcome seeks to restore the industry to 80% capacity utilization.

Therefore, aluminum production could increase (at least, domestically). Increasing the domestic capacity utilization rate up to 80% would mean more aluminum will be produced and consumed domestically.

Aluminum Carve-outs?

President Trump has yet to determine if all the report recommendations will be applied. MetalMiner believes that even if the quotas/tariffs implemented are lower than that indicated in the Section 232 aluminum report — meaning a lower tariff and, therefore, a reduced capacity utilization rate — aluminum products may not receive as many exemptions as steel products.  

Contrary to steel, most aluminum products can be produced domestically and therefore, aluminum would potentially require fewer carve-outs than steel.

Timing becomes an issue when considering the impact of the Section 232 aluminum investigation outcome.

For the aluminum industry, restarting idled capacity takes around 9 months. After that, each smelter needs to start running toward its optimal capacity, which also takes time. Realistically it may take 12-15 months of time to reach optimal production.

Trump will need to consider that timing in his decision. Without careful consideration, reducing aluminum imports could have a negative impact for U.S. aluminum buyers in the short term. 

Therefore, the president might need to take this into account and give some time for the industry to adapt to the new measures.

Want to see an Aluminum Price forecast? Take a free trial!

Trade Wars: Hype or Reality?

We will address this issue in an upcoming post.

(Editor’s Note: This is the second part of our series covering the recently released Section 232 aluminum report. In case you missed it, you can find Part 1 here.)

Domestic Aluminum Industry

The aluminum industry has three main steps according to the production process:

  • Upstream, or primary or unwrought production.
  • Downstream, which consists of processing aluminum into semi-finished aluminum goods (such as rods, bar, sheets, plates, castings, forging and extrusions). The U.S. is the second-largest aluminum producer, just behind China.
  • Secondary production, or production based on recycled scrap. The U.S. is the world’s leading producer of secondary unwrought aluminum. Therefore, secondary production is not the focus of the Section 232 report.

Section 232 buying strategies – download MetalMiner’s Section 232 Investigation Impact Report today!

Relevant Findings

The Department of Commerce revealed several findings in its analysis. The following help justify the 80% capacity utilization rate arguments:

  • Aluminum is essential to U.S. national security. In 2016, the U.S. imported more than 90% of the primary aluminum consumed. Therefore, total reliance of imports cannot provide an assured supply of aluminum.  
  • Imports and global aluminum production overcapacity caused by foreign government subsidies (such as China) have had a negative impact on welfare and production capacity of the U.S. Examples of this negative impact include: declining employment, poor financial status of the U.S. aluminum industry and reduction of R&D expenditures.
  • Domestic aluminum production capacity continues to decline. According to 2016 data, the U.S. produced 840,000 metric tons, becoming the sixth-largest aluminum producer in the world while ranking as the fourth-largest consumer.
  • Aluminum is a highly energy-intensive industry (based primarily on gasoline prices).  Therefore, competitive advantage goes to those who can produce in countries with lower energy costs (such as the U.S.). China, however, according to 2016 data, appears much less competitive than the U.S. based on energy costs. The cost of electricity in China was $614/mt versus $532/mt in the U.S. per metric ton. See our analysis here of the cost to produce one ton of aluminum.
  • Regarding the capacity utilization rate, in 2016 the U.S. industry operated at a 48% capacity utilization rate. Meanwhile, in 2017, the only two aluminum (upstream) producers in the U.S., Alcoa and Century Aluminum, operated at a 43% capacity utilization rate as measured in November 2017. Domestic production remains well below demand. In 2016, global primary aluminum consumption was 59.7 million metric tons (an increase of  5.4% year over year). China had  53% of global consumption, the U.S. represented 9% and Germany 4%. Chinese consumption remains well below its production level, while U.S. production is substantially lower than consumption.
  • U.S. imports of aluminum have increased while exports decreased. Imports increased by 34% in 2016 on a weight basis compared to 2013 levels. For the first 10 months of 2017, imports ran 18% above 2016 levels on a tonnage basis. Primary aluminum (unwrought) represents 63% of the total by value. The second-largest category (aluminum plates, sheets, and strips) accounts for an additional 19% of imports.  
  • Aluminum imports coming from other regions have also harmed the aluminum industry. Aluminum bars, rods and profiles coming from Vietnam have increased by over 800% between 2013 and 2016, with the trend continuing in 2017. A portion of the imports in this category from Vietnam are likely circumvented Chinese products trans-shipped to avoid duties.
  • Meanwhile, U.S. aluminum exports decreased over the 2013-2016 period. Also, for the first 10 months of 2017, U.S. exports showed a slight decrease in numbers, falling by 8%. U.S. exports go mainly to North American Free Trade Agreement (NAFTA) partners and neighboring countries.

Potential Impact on Prices

Neither the long- or the mid-term picture for aluminum prices will likely see much of an impact from the Section 232 investigation and report, as the market had already anticipated the results.

Prices in the short term, however, might, find some support.

Even without a Section 232 outcome for aluminum, aluminum prices remain bullish and the long-term trend may continue.

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Meanwhile, President Trump has yet to determine the extent of these measures. The U.S. aluminum industry will not add additional aluminum production capability until idled capacity is restarted, which takes around 9 months.

Therefore, LME aluminum prices may suffer some short-term price fluctuation, but will then trade again according to the current market trend, which is bullish, until markets receive more clarification.

Last week, the Department of Commerce released the reports accompanying the Section 232 investigations for both aluminum and steel products. The Department of Commerce initiated the investigations last April under Section 232 of the Trade Expansion Act of 1962, which grants the president the ability, along with his Department of Commerce, to determine whether certain imports are having an injurious effect on national security. 

Section 232 buying strategies – download MetalMiner’s Section 232 Investigation Impact Report today!

As reported last Friday on MetalMiner, the Department of Commerce proposed two alternative solutions for the alleged harm caused by a glut of aluminum imports. Both solutions seek to restore domestic aluminum production to 80% of capacity utilization. This data may not surprise readers, as the Section 232 steel investigation recommendations include three steel policy alternatives constructed on the same premise.

What MetalMiner found most striking about both report recommendations involves the goal of restoring both the aluminum and steel — stainless steel, too — industries to 80% capacity utilization rates.

The DOC believes an 80% capacity utilization rate reflects a healthy industry. By healthy, the Department of Commerce in the Section 232 steel report acknowledged that, “Industry analysts note that utilization of 80 percent or more is typically necessary for sustained profitability, among other factors.” Moreover the Section 232 report for steel suggested, “For most capital and energy-intensive U.S. steel producers, capacity levels of 80 percent or higher are required to maintain facilities, carry out periodic modernization, service company debt, and fund research and development.” (Sources cited in the Steel Section 232 report included Market Realist’s “Why steel investors are mindful of capacity utilization rates,” October 2, 2014.) 

The aluminum analysis looks similar.

The aluminum report pointed to several factors as driving the need for the 80% capacity utilization rate. The DOC examined employment numbers, the dangers of overcapacity, declining R&D and fewer capital expenditures.

Of these arguments, some will seek to argue that employment is somewhat less important, as gains in efficiency and productivity could lead to a decline in employment. But clearly the overcapacity issue in general has forced all but Alcoa and Century Aluminum to declare bankruptcy. By poorer profitability, the industry will not effectively invest in R&D — because it can’t afford to — which will impact future military applications and capabilities.

Therefore, as with the steel industry, the 80% capacity utilization rate reflects a “healthy” aluminum industry with regard to profitability, efficiency and innovation.

Here is the National Security Argument

When steel and aluminum industries do NOT operate at 80% capacity utilization, the economic viability of the industry to produce materials in various war-time scenarios becomes tenuous. MetalMiner will cover this point more explicitly in our Section 232 steel analysis.

Certainly, when mills do not operate at healthier 80% utilization levels, the means to innovate and develop new products, improve production capacity and further increase efficiencies becomes more challenging.

Want to see an Aluminum Price forecast? Take a free trial!

Aluminum Products

The Department of Commerce included almost all downstream aluminum products in its recommendations.

However, the scope of the investigation does not include bauxite or alumina, or feedstock for the production of primary (unwrought) aluminum.

The investigation also does not include aluminum waste, aluminum scrap, aluminum powders and flakes.  

(Editor’s Note: In the next part of this series, we’ll look at the domestic industry, other relevant findings and the potential impact on prices.)

A recent article in  Crain’s examining an alleged manpulation of the VIX, otherwise known as the Volatility Index, prompted MetalMiner to take a deeper look at the relationship between the index, commodities and industrial metals.

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As a reminder to readers, trading activity and the sentiment behind trading activity determines the movements of any exchange-traded product, from soybeans to gold to oil. Therefore, buying organizations may want to better understand the relationship between the VIX and industrial  metals.

What is VIX?

VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index. The VIX is a popular measure of the stock market’s expectation of volatility implied by S&P 500 index options. Traded on the CBOE, the VIX is known as the “fear gauge,” or the “fear index.”

As a measure of expected volatility, the VIX is calculated as 100 times the square root of the expected 30-day variance of the S&P 500 rate of return. Using this math, the variance is annualized and the volatility can be expressed in percentage points.

VIX and Commodities

Concerns for traders, however, started as a result of a recent spike in the VIX that drove investors toward billion-dollar losses. Before the index spiked, the VIX traded mostly sideways. The latest spike drove the VIX to 2015’s highs.

VIX (CBOE Volatility Index). Source: CBOE

The VIX and the CRB commodities index share a long-term negative correlation. A negative correlation means that when one index increases, the other tends to decrease. The opposite also holds true. Therefore, when commodities trade in an uptrend, the VIX tends to trade in a downtrend.

However, this correlation does not appear as strong as the commodities and base metals correlation (for example). The negative correlation between the CRB and the VIX indexes falls in the 0.7 to -0.7 range. The closer to +-1, the stronger the correlation. However, the 0.7 to -0.7 correlation still serves as a good indicator for buying organizations.

Commodities in black. VIX index in green. Source: MetalMiner analysis of StockCharts

The longer the time period, the stronger the correlation. Therefore, spikes and short-term movements may not affect the other index.

The recent spike in the VIX does not have a meaningful impact on the CRB index. Buying organizations may wish to use the VIX as another indicator of the commodities trend, particularly for the longer term.

VIX and Industrial Metals

Since commodities and base metals have a positive correlation (meaning that both move in the same direction), the VIX can serve as another road sign for base metal price movements (albeit in an inverse relationship).

Base metals in black. VIX index in blue. Source: MetalMiner analysis of StockCharts

The negative correlation also applies to the Industrial Metals (DBB index) and the VIX.

Free Download: The February 2018 MMI Report

However, the negative correlation appears stronger for commodities, particularly for the longer term. The chart above highlights the industrial metals and VIX index correlation as even stronger than the VIX-commodities correlation. Therefore, buying organizations will want to follow the VIX, particularly for the longer term.

The Stainless Steel MMI (Monthly Metals Index) jumped four points again this month for a February reading of 75.

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In January, skyrocketing LME nickel prices drove the Stainless Steel MMI. Nickel prices have climbed above the $13,000/mt level. 304 and 316 surcharges increased this month, returning to their previous levels.

LME Nickel

Nickel prices increased sharply during January. However, prices decreased slightly in early  February. As reported previously by MetalMiner, nickel price volatility has increased over the past few months. Therefore, nickel prices may prove quite tumultuous from a short-term perspective and are trading within the orange-dotted band in the chart below.

Source: MetalMiner analysis of FastMarkets

The long-term nickel price uptrend also remains strong. Prices have moved toward June 2015 levels and already breached our October 2017 long-term resistance levels, as per our Annual Outlook. Therefore, nickel prices remain in a strong uptrend and could continue increasing in the coming months.

Domestic Stainless Steel Market

Following the recovery in stainless steel momentum, domestic stainless steel surcharges increased this month. Surcharges remain above last year’s lows (under $0.4/pound); they remain in an uptrend, even if their pace has slowed. However, buying organizations may want to look at surcharges closely to reduce risks, either via forward buys or hedging.

Source: MetalMiner data from MetalMiner IndX(™)

FerroChrome vs. Chrome Metal

Two months ago, MetalMiner reported on the anomaly between ferrochrome and chrome metal prices.

Source: MetalMiner data from MetalMiner IndX(™)

Ferrochrome (FeCr) is a chromium and iron alloy containing 50% to 70% chromium by weight. Historically, Ferrochrome and chrome prices correlate tightly but the high iron ore prices caused ferrochrome to spike. However, both prices (ferrochrome and chrome) have fallen back to their historical trading pattern of moving together.

What This Means for Industrial Buyers

Stainless steel momentum appears in recovery, similar to all the other forms of steel. As both steel and nickel remain in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips. To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.

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The Raw Steels MMI (Monthly Metals Index) inched three points higher this month, reaching 86 points.

Steel price momentum appears to have continued as prices increased sharply in January. February has already signaled a continuation of this uptrend, with HRC prices breaching the $700/st level. HRC prices have reached the highest levels in more than two years and could continue to climb.

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Source: MetalMiner data from MetalMiner IndX(™)

The spread between HRC and CRC prices fell this past month, returning to the  $140/st level. Since the beginning of 2016, the spread between HRC and CRC prices increased to around $200/st. The spread has returned to normal levels, with HRC prices increasing more than CRC prices.

President Trump has yet to release results from the Section 232 investigation. Commerce Secretary Wilbur Ross sent his Section 232 steel report to Trump last month; the president has 90 days as of Jan. 11 to act on the report’s findings and recommendations.

Global Steel Sector

According to the World Steel Association (WSA), global production of crude steel increased by 5.3% during 2017. The world map below reflects some of the changes in steel production by country and the  impact on total steel output.

Source: MetalMiner analysis of WSA data

Chinese global production of crude steel increased by 5.7%. However, China’s exports fell to 75.4 million tons last year from the previous 108.5 million tons. Japanese production of crude steel decreased by only 0.1%, while U.S. crude steel production increased by 4%.

According to Eurofer, European steel demand could increase by 1.9%. In 2017, European steel imports fell by 1% due to defensive trade measures.

Shredded Scrap

Shredded scrap prices increased again in January, shifting the latest short-term downtrend to an uptrend. The long-term uptrend remains in place, and scrap prices have now moved together with U.S. steel prices.

What This Means for Industrial Buyers

As steel price dynamics showed a strong upward momentum this month, buying organizations may want to understand price movements to decide when to commit mid- and long-term purchases. Buying organizations with concerns about the Section 232 outcome and its impact on the steel industry may want to take a free trial now to our Monthly Metal Buying Outlook. Our Monthly Outlook will include a detailed analysis of the Section 232 outcome.

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Actual Raw Steel Prices and Trends

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