steel price

Last Month, MetalMiner reported that stainless steel cost had been holding strong amid high demand and increased production. However, we did identify some cracks in what might otherwise look like a solid recovery. As we transition from Q2 to Q3, some of those cracks have grown significantly.

stainless steel tanks

Low Demand in China Affecting Stainless Steel Cost

According to a recent report from the Shanghai Metals Market, prices are seeing downward pull due to low demand. Though mills are optimistic that Q3 will bring more orders, warrants remain down thus far. As indicated in the report, “In the spot market, the market is uncertain about when the dropping of stainless steel prices will come to an end. Traders mainly hold a pessimistic outlook for the recovery of consumption.”

“Pessimism” seems to be the word of the day when it comes to the Chinese economy and stainless steel cost. President Xi Jinping hasn’t been shy about using his government to spur growth. Even so, reports from organizations like Fortune think the stimulus plan remains too weak to save the ailing economy.

All in all, the company’s strict adherence to zero-COVID initiatives and the crippling lockdowns that result are just big a drag on the economy. Combine this with the worst property market decline on record, and it’s no surprise why steel costs are in danger. In the end, no amount of supply can make up for lack of buyers.

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Meanwhile, Steel Manufacturers in the EU are Talking Rebound

The European stainless steel market seems to be enjoying all the optimism China lacks. Recent estimates published in S&P Global are predicting a significant rebound in Q3 and Q4. Specifically, experts see the market rebounding almost to pre-COVID levels. This would be equivalent to around 1.2 million mt of finished longs for 2022. This represents a significant improvement over the 1.05 million mt produced in 2021.

Stainless Steel Costs

2022, Adobe Stock.

According to Emilio Giacomazzi, the sales director at Cogne Acciai Speciali in Italy, “We recorded a jump in demand for stainless steel after the COVID pandemic. Since May the market has been in a pause as stocks are high…but overall demand is good.” Though raw material prices (like everything else) are up, sectors like auto, oil, and aerospace are buttressing prices with demand.

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In the US, Oil and Gas Expansion Could Spur Steel Demand Further

The oil and gas industry remain one of the biggest consumers of stainless steel products. The production of pipes, pumps, tanks, and valves are all dependent on stainless steel. Just last week, Targa Resources signed a multi-billion-dollar deal to purchase operations in the Permian Basin. Lucid Energy previously owned the operation, but Targa committed to dramatically expand its regional presence. If this comes to fruition, the 600,000 acres will necessitate a lot of stainless-steel materials.

Though the public standoff between the Biden administration and oil and gas producers will likely continue, things are a bit different behind the scenes. Recently, industry execs sat down with Energy Secretary Jennifer Granholm in a meeting that both described as “productive.”

According to the American Petroleum Institute, the discussion sends “a positive signal to the market that the US is committed to long-term investment in a strong US refining industry and aligning policies to reflect that commitment.” If true, this could create a space where green energy and traditional energy can peacefully coexist.

When Will the Stainless Steel Rally End?

Many industry insiders have already published reports expecting steel prices to retreat over the coming months. It’s true that global prices, which have skyrocketed since October 2020, seem to have peaked. Supply is back, and demand seems shaky from country to country. Still, only time will tell if (and where) steel prices will find new support.

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New Steel Billet Caster in the Works

Longs producer British Steel has begun constructing a billet casting machine at its Scunthorpe works. It will be the second such machine built at the site, which lies in England’s East Midlands region.

On June 15th, the company said that the continuous caster should come on stream in late 2022. Once in operation, it will produce square billet in 140x140mm, 155x155mm, and 180x180mm sizes.

“The new caster will produce billets of an even higher standard, with much better internal and surface qualities,” said Richard Longbottom, Technical Manager of Steelmaking Development. “We’ll also have a broader product range. This enables us to become more competitive and expand our offering to customers.”

British Steel

Steel Billet Casting, 2022, Adobe Stock

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Spokespeople for the company added that Italian firm Danieli will supply the new equipment. However, they declined to say what the new casting machine’s capacity would be or how many strands it would have.

The existing eight-strand billet caster can cast an estimated 900,000 metric tons per year of semi-finished product. That includes 150x150mm and 180x180mm sizes made out of the crude steel produced on site.

The plant could originally produce about 4.5 million metric tons of crude steel per year via four on-site blast furnaces and three 300-metric ton converters. The spokesman noted, however, that the plant is no longer pouring those volumes. Billets act as a feedstock for rolling rebar, merchant bar sections as well as wire rod.

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British Steel Remains a Major Player in the Metals Market

The new caster is part of an £80 million ($98 million) upgrade project for Scunthorpe, in England’s East Midlands. Whilst the majority of that total is intended to finance the new billet caster at £48 million ($59 million), the remainder is to upgrade and reconfigure Scunthorpe’s wire rod mill.

“The product range will also offer customers considerably improved mechanical properties and enhanced options for supply condition,” the company stated. “[Examples include] normalized rolled and low-temperature rolled wire rod.”

The company also indicated that British Steel could produce up to 3 million metric tons per year of rolled long products. Besides wire rod in 5.5-17mm diameters, Scunthorpe rolls construction steels (sections) and rail. Meanwhile, the Teesside mill rolls construction steels and the Skinningrove works, which sites about 100 kilometers north of Scunthorpe, rolls special profiles.

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Other Scunthorpe Steel Capabilities

Scunthorpe can also cast blooms from a six-strand continuous caster as well as slab in 225mm- and 298mm-gauges from a two-strand casting machine. Each caster has a listed capacity of 1.2 million metric tons per year.

Billets from the new caster will also go to the British Steel’s FN Steel plant, in the Netherlands. Reports indicate that the facility can roll at least 350,000 metric tons per year of wire rod in 5.5-30mm diameters.

Applications for British Steel’s rolled wire rod include tire reinforcement, automotive spring and steels, as well as rail clips. Chinese steelmaking and chemicals conglomerate Jingye Group acquired British Steel in 2020. Greybull Capital originally formed British Steel in 2016 when it acquired the Long Products business from Tata Steel.

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The Renewables Monthly Metals Index (MMI) rose by 2.27%. After trending downward since March, renewable resources finally saw a price boost.

Renewable Resources

Renewable Resources Partnership: Hydro Power and Air Battery Systems

According to an article from Renewable Energy World, Augwind, a company specializing in renewable resources and energy, has launched a collaboration with Voith Hydro. The two companies plan to install water pumps and other power systems into Augwind’s airbattery storage system. Augwind’s goal is to optimize performance levels for its energy network. With Voith Hydro’s help, the two companies could reach this solution together.

Augwind and Voith Hydro have numerous specialties. This includes, but is not limited to, hydro-energy, compressed-air batteries, and generators. With this many resources, the likelihood of the project panning out in due time remains high. However, achieving project goals could become much more difficult if renewable costs start to trend upward.

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Renewable Resources: Offshore Wind Power Makes Headway in New York

In New York, offshore wind power is getting a boost from start-ups that bring new and innovative technology resources to the table. The project aims to create a central offshore hub to add to the industry’s innovation network system. According to Equinor Wind’s President, Siri Espedal Kindem, “we are accelerating the development of the offshore wind industry in New York and beyond.”

The project launch is well-timed. Though renewable prices went up last month, MetalMiner also reported that steel prices dropped. The predominant material in most US windmill systems is, of course, steel. A drop in steel pricing could signal it’s the right time to initiate construction on the new offshore facility.

Despite this bit of kismet, offshore wind turbines still face a number of roadblocks. The first is that the industry in general faces a lack of funding. Another difficulty involves getting clearance to conduct offshore construction. However, with BP providing a staggering $250 million, the project for these renewable resources are well covered.

Grain-Oriented Electrical Steel Prices Rise by 3.53%.

In the Grain Oriented Electrical Steel/GEOS MMI index, prices continued their upward trend, rising by about 3.53%.

Renewable Resources

 

Electrical Steel Market in Europe Surpassing the US’ Electrical Steel Market

Newswire recently reported that the European electrical steel market will hit an estimated value of $16.9 billion by 2032. The article indicated that, with electrical resistivity on the rise, new research methods in electrical steel are being utilized. This trend should continue to push the use of materials like electrical steel sheets. According to Factmr, Europe’s current electrical steel market sits at an estimated $6.3 billion.

One reason for Europe’s aggressive use of electrical steel lies in electrical steel’s unique features. With magnetic properties that exceed other steel grades and forms, electrical steel boasts incredibly high permeability. Compared to other alternatives, it’s possible to get a lot more from the finished product.

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Electrical Power Amendment to the Defense Protection Act

On June 6th, the White House published an amendment to section 303 of the Defense Protection Act of 1950 to further clean energy initiatives. The amendment states that transformers and electrical power grids are critical for domestic defense and a more sustainable future. Therefore, the expansion of power grids and transformers is necessary. President Biden also noted that the country could not meet its required national defense needs without the amendment in place.

The amendment could indicate an oncoming demand for more GOES in the US. However, current US inflation rates may prevent such an outcome from coming to fruition. Rising costs will likely impact how fast the US can complete the power-grid and transformer projects.

So, while the need for transformers and GEOS certainly exists, the required funding may not.

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The Construction MMI dropped by 9.41% from May into June. The decline comes amid growing optimism about the state of the industry. Even so, talk of recession continues to cast a shadow over the post-COVID economy.

Construction Metal

U.S. Construction Market Expected to Grow 3% by 2026

Despite the doom and gloom recession talk going on, industry insiders remain confident that the U.S Construction Market can trend up. In a report published by GlobeData, the $1.9 trillion industry can expect to see another 3% growth between 2023 and 2026. The organization cited new investments in renewable energy, housing, and transport to support its claims. They also clarified that the bulk of the growth comes from the residential sector, where demand remains at a boiling point.

Despite this optimistic outlook, GlobeData made it clear that output will likely remain low through 2022. They mentioned this stems from “subdued investor confidence amid a steep rise in construction costs.” While it’s true there is a light at the end of the tunnel, it’s too early to tell where the end lies.

To that point, some data suggests that housing supply and demand will soon take a back seat to cost…

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U.S. Housing Market Sees Drop in Building Permits, Rise in Commercial Projects

Reuters recently reported that building permits declined a full 3.2% back in April. Meanwhile, new home sales dropped 16.6%. Industry experts claim that soaring mortgage rates and increased costs are essentially cutting first-time buyers out of the market.

Considering that inflation upended so many industries, it’s hardly surprising that Americans are cooling on home ownership. The median home price surged 19.6% in the last year. This puts the average cost of buying a house at a whopping $450,600. It’s not exactly what you’d call “starter home” pricing, and it’s not likely to change anytime soon.

But while residential construction may be cooling off, U.S. commercial construction outlooks are  expected to soar. In fact, according to a Dodge Data and Analytics Report, a massive backlog of pre-pandemic projects waiting to break ground remains. Despite rising material prices and ongoing supply chain problems, commercial building continues looking up.

However, DD&A did qualify their prediction with a few stipulations. For instance, the company measures its start data in dollars, not the number of projects. This leaves the analysis open to misinterpretation amid rising inflation.

Still, DD&A remains adamant that the industry is “in the green.” In fact, if it weren’t for supply chain problems, they claim that we’d have a much more dramatic recovery.

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Construction MMI: China Looks to Outpace a Lackluster 2021

When it comes to the industry’s impact on the global Construction MMI, many experts look to China for answers. There’s no denying that China remains the biggest construction market in the world, worth well over $1 trillion in the U.S. However, the industry has been plagued by COVID-related issues for going on almost three years now.

A recent report published in Business Wire confirmed what a lot of people expected. First, the Chinese construction industry grew by only 2.1% in 2021, the lowest number since 2007. Fortunately, projections for 2022 are more optimistic. In fact, despite ongoing lockdowns and supply chain problems, the industry expects to expand by 4.5% by year’s end.

This is largely due to major government investments in “fixed-asset projects” in energy and transportation. Helping the report is the fact that several major projects broke ground at the end of last year. Among them are the $7.2 billion Wuhan Chow Tai Fook Financial Center and the $4.2 billion Qingdao Shenyuanhai Offshore Wind Farm.

U.K. Housing Demand Strong Amid Record Inflation

Construction economists at Arcadis recently revised their price forecasts to include inflation of up to 10%, a dramatic increase from the previous assessment of 5%-6%. The organization defended its new figures by citing how Russia’s war in Ukraine affected energy and material availability.

They went on to say that, “projects with a greater exposure to the steel market, including the logistics sector and some infrastructure sectors”, could see even higher inflation – up to 12% or 13%!

Despite all this, The Guardian cited demand for new homes surging all across the U.K. In fact, two of Britain’s biggest house builders, Crest Nicholson and Bellway, reported strong sales throughout Q1. So far, the trend has continued into Q2. Bellway expects to complete more than 11,100 homes before July despite supply bottlenecks. On top of that, the company reports that increased sale prices largely neutralized inflationary costs.

2021, Adobe Stock

In the U.S., there are indications that the housing market may start to cool off a bit. With the average cost of living soaring around the world, builders may run out of buyers. For now, the industry continues riding the wave. Still, they’re watching closely for signs of lessening momentum.

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Construction MMI: Actual Metal Prices & Trends

  • Chinese steel rebar prices dropped 3.6% month over month, starting June off at $739 per metric ton.
  • European commercial 1050 sheet aluminum also dropped, declining 3.82% to $4,302 per metric ton.
  • H-beam steel from China registered a 4.57% decline to $720. The country’s aluminum bar prices declined 6% to just $3,112 per metric ton and continue to drop.
  • S. scrap steel fell a surprising 5.91% to just $525 a short ton.

U.S. steel prices continue to retreat. After consistent week-over-week declines, HRC prices now sit more than 15% beneath their late-April peak while plate prices continue to trade sideways as they remain just 6% beneath their all-time high.

Steel prices

The Raw Steels Monthly Metals Index (MMI) fell by 7.87% from May to June.

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U.S. Manufacturing PMI climbed, Consumer sentiment plummeted

Steel pricesThe U.S. ISM Manufacturing PMI reached 56.1% in May. While the index climbed from April’s reading of 55.4, it marks the second-lowest reading since September of 2020. Domestic steel prices, particularly HRC, loosely mirrors the index trend. The index remains within a larger downtrend since it peaked in April of 2021.  

Of particular note, in spite of ongoing inflationary pressures, demand expanded as the New Orders Index grew from 53.5 in April to 55.1 in May. This data follows a 0.9% increase in consumer spending during April.

Meanwhile, according to preliminary data from the University of Michigan, consumer sentiment plunged to a record low between May and June. The index saw a 14% month-over-month decline, to hit its lowest recorded value at 50.2. June’s value compares to the low reached during the 1980 recession of 51.7 in May 1980. While overall consumer spending often diverges from sentiment, June’s consumer sentiment data may likely foreshadow a shift in spending trends toward necessities as consumers grapple with inflated prices. 

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Infrastructure funds could support steel prices in the longer term

According to the White House, states received more than $110 billion to fund projects related to the Bipartisan Infrastructure Law since the bill was signed into law 6 months ago. The released funds are earmarked for more than 4,300 specific projects, including those related to road, bridges, port and airport modernization and water infrastructure throughout the U.S. An additional $100 billion in requests for information and notices of funding availability have also been released. Spending related to the infrastructure bill will take place over the course of the next 5 years. 

In Fiscal Year 2022 alone, the U.S. Department of Transportation announced $52.5 billion in Federal Highway Apportionment and $246 million for the Appalachian Development Highway System.Steel prices

Unlike other forms of steel, plate prices remain near record highs, albeit with modest declines since late April. HRC, CRC and HDG prices declined alongside falling mill lead times. While plate did not see the same increase in production capacity as other forms of steel, mill lead times have nonetheless retraced for plate which would indicate availability constraints no longer remain a driver in persistently high prices. Infrastructure spending has and will create steady demand for plate. Due to Buy America provisions, the plate market will likewise remain substantially insulated from lower-cost imports.    

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April U.S. steel imports, production slide

U.S. steel imports and U.S. steel production started to soften. According to the U.S. Census Bureau, total U.S. imports of steel products saw an 11.68% decline from March to April. HRC, CRC, HDG and coiled plate imports saw respective 25.11%, 16.27%, 8.91% and 13.63% declines.

Meanwhile, according to the World Steel Association, crude steel production in the U.S. fell from roughly 7.0 million tons in March to 6.9 million tons in April. Further, April’s total reflects a 3.9% year-over-year decline. As steel supply both through imports and production slid on the back of continuous, across the board steel price declines (albeit modest for plate), this may likely prove to be an early indication of a downward trend for domestic steel demand in months to come. 

Actual steel prices and trends

Chinese slab prices increased by 8.11% month-over-month to $812 per metric ton as of June 1. Meanwhile, the Chinese billet price decreased by 4.71% to $667 per metric ton.

Chinese coking coal prices fell 2.23% to $524 metric ton.

U.S. three-month HRC futures fell 14.76% to $976 per short ton. While the spot price decreased by 8.92% to $1,338 from $1,469 per short ton. U.S. shredded scrap steel prices fell 5.91% to $525 per short ton.

NOTE: This story was updated on 6.7.22

The European Commission (EC) has extended its existing safeguard tariffs on steel to June 30, 2024, but with some adjustments. In a letter to the WTO,  the executive body for the 27-member group said the annual rate of liberalization is due to increase from 3% to 4% as of July 1. Liberalization is the degree by which the quota lowers. To that point, the EC also adopted a regulation to allow for temporary trade liberalization on Ukrainian steel.

In its June 3rd issue, the Official Journal of the European Union specifically noted Ukraine’s removal from the safeguards. This meant the changes would go into effect the very next day. It’s an important move in a lot of ways, as Ukraine’s economy is already suffering greatly under the weight of the Russian invasion.

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steelmaking in an EAF

nikitos77/Adobe Stock

Ukrainian Steel Receives Special Consideration

Imports of Ukrainian steel into the bloc have largely ceased since Russia began its military invasion of the country on Feb. 24. Since that time, EC has levied several rounds of sanctions on the latter country. In its letter to the WTO, the EC noted, “This suggests that Ukraine is currently unable to produce and/or export these products in any meaningful volume to the Union market.”

“Under these circumstances,” the letter continued, “and having analyzed the quota use by other exporting countries subject to the measure, the Commission considered that there would be a risk of a potential shortage of supply for Union users in these categories if it did not take any action.”

The liberalization covers Ukrainian quarto plate as well as angles, shapes, and sections. Ukraine has used 63% of its quarto plate quota of 290,895 metric tons for Q1 2022 as of Feb. 21. It also used about 96% of its 61,159 metric ton quota on angles, shapes, and sections.

Ukraine also produces most of the raw materials used by steelmakers in Poland. Regardless of the new rules, that country is likely to experience production difficulties. That’s why it’s no surprise to see the EU looking elsewhere for product.

The EU Looks to the East

The EC also said that measures on Vietnamese-origin HDG will come into effect on July 1, though the letter did not indicate a tentative quota on that product. According to the European Steel Federation, estimated HDG imports in 2022 are due to total almost 1.35 million metric tons in 2022, up 37.8% from 979,205 metric tonnes.

Anti-COVID lockdown measures in Shanghai and other population centers within China caused a major shift in trade these past few months. In fact, insiders claim the change has prompted flats rollеrs in that part of the world to target European markets.

Meanwhile, China’s official GDP growth forecast for 2022 remains at 5%. However, Swiss-headquartered UBS slashed its own forecast down to 3% from 4.2% in late May. JPMorgan Chase & Co. cut its outlook from 4.3% to 3.7% the same week. It’s a sign that the world’s largest metal exporter might be in for a rough few quarters.

At the same time, producers in South Korea and Taiwan were offering hot rolled coil at €860-870 ($915-925) per metric ton cfr European port. Compare that with the minimum €940-950 ($1,010-1,020) exw in southern Europe. Meanwhile, mills in northern Europe were seeking prices of €1,010-1,050 ($1,085-1,130).

Hot rolled coil serves as feedstock to produce cold rolled coil, and subsequently hot-dipped galvanized sheet. The product has applications in the auto and construction sectors as well as in street furniture.

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Steel prices and gas are the primary topics of conversation today. It seems that steel traders in China are seeking more buyers abroad for their finished steel products. Meanwhile, Russia is mulling cutting gas supplies to the EU. Gas prices have an enormous impact on steel prices.

China: Lockdowns at Home, Low Demand Abroad

The news comes hot on the heels of reports detailing reduced consumption in Europe and ongoing COVID-19 lockdowns throughout China. Indeed, China’s latest anti-Coronavirus measures have resulted in a 2.9% industrial output drop year on year for April. At the same time, reports indicate that retail sales were off 11.1%. Steel price offers from Taiwan and South Korea were €860 ($910) per metric ton cfr Europe, also down from €1,080 ($1,140) cfr Europe from Southern and East Asia.

As one trader told MetalMiner, “Energy costs are hitting people hard. There are more defaults on energy bills.” He added that “The whole world wants to sell to Europe.” However, with inflation hitting record highs and the war in Ukraine charging onward, the market is anything but ripe for the picking.

Another trader pointed out that summer holidays in the Northern Hemisphere (normally in June, July, and August) will also mean lower building activity and lower demand. This is sure to put further downward pressure on steel.

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U.S., China and Russia flags

cil86/Adobe Stock

Russia: War, Sanctions, and Rubles

Uncertainty about whether or not Russia could cut gas supplies to the EU over European Commission sanctions has created volatility in prices for that hydrocarbon. Steelmakers can rely on natural gas for ironmaking in blast furnaces as well as for steelmaking in electric arc furnaces.

In 2021, the European Union imported 155 billion cubic meters of natural gas from Russia. This accounted for around 45% of total imports and close to 40% of its total gas consumption.

Another possible factor contributing to the ongoing volatility is the possibility that buyers might refuse to pay for Russian gas in rubles. In late March, Russian President Vladimir Putin issued an order demanding that “hostile countries” pay for their gas supply in their currency by opening accounts at Gazprombank. Indeed, Russia has already cut off gas supplies to Poland and Bulgaria over their refusal to comply with the demand. This immediately sparked concerns over what might happen if other countries followed suit.

The European Commission, the executive body for the European Union, has since softened its stance against buyers of Russian gas opening accounts at Gazprombank. They even stated that buyers could make payments in dollars or euros. However, the organization said nothing about operators opening a second account in ruble-based payments, which several have reportedly done.

The benchmark Dutch TTF price for the hydrocarbon commodity was €95.50 ($100) per megawatt hour on May 17, up 2.84% on the day from €92.86 ($97.93). The price achieved a high of €227.20 ($239.68) back in March.

natural gas tap

PhotocreoBednarek/Adobe Stock

Steel Prices and Gas Still Closely Intertwined

On April 29, the European Statistical Office reported that month’s outlook for inflation was 7.5% year on year in the 19 states that have adopted the euro as their currency. The organization also noted that energy was likely to have the highest annual rate in that outlook at 38%.

Of course, the EU has been trying to lessen its dependence on Russian oil and gas since the country invaded Ukraine in February. So far, their efforts include ramping up renewable energy products, lowering energy consumption, and diversifying sources.

However, many industry watchers have difficulty believing that Europe will be able to achieve that goal. “How is Europe going to back off from Russian gas?” one analyst asked. “I simply can’t see how they’re going to get away from it.”

A second source noted that it would be possible to reduce dependency on Russian gas by sourcing it from North Africa. Of course, this would require the construction of new infrastructure such as pipelines and terminals. He also said that whilst other countries have tried to diversify their gas supply, others like Germany have not. “It was comfortable for the Germans,” he said of the country’s gas transmission infrastructure.

One option for some steel plants would be to use gas produced from coking ovens to help fire blast furnaces. However, results would be inconsistent, as not every steel plant is so equipped.

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The ascent for U.S. steel prices faltered as HRC, CRC, and HDG prices began to fall in early May. Plate prices also took a big dip.   

All in all, the Raw Steels Monthly Metals Index (MMI) fell by 8.9% from April to May.

Know what to do when the market shifts. Related article: The Art of Timing Your Buy

Iron Ore Slumps to 4-Month Low on Demand Concerns

Iron ore prices fell to a 4-month low on mounting demand concerns due to China’s ongoing lockdowns. Meanwhile, iron ore fines fell to $131.90 on May 10, the lowest since Jan 31 and a 12.6% decline since the close of March. 

According to data from the National Bureau of Statistics (NBS), Chinese steel output dropped more than 6% year over year in March. On top of lockdowns and restrictions due to COVID outbreaks, Chinese steel production faced several other curbs in recent months. Among them were Olympics-related cuts, which expired in March, and China’s specific intentions to reduce crude steel production in 2022.

China’s property sector also remains a point of concern. Property developer Sunac missed a recent bond payment in early May, becoming the latest property developer to fall into default. According to the company, “liquidity issues” played a significant role in their missing payment. Additionally, sales were “significantly affected by the COVID-19 outbreak.” Indeed, there was a 65% drop in sales from March to April. Before Sunac’s default, Zhenro Properties attributed its own default in April to the “unforeseen scale and duration” of lockdowns in Shanghai.

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Whirlpool Trims Sales Forecast as Steel Prices Dip

Domestically, Whirlpool started to see a slowdown in demand, which caused it to narrow projected sales for 2022. Following an 8.2% year-over-year drop in sales during the first quarter, the North American appliance sector stated it would remain level during 2022. This is a major change from its previous forecast of 3% growth. Industry wide, North American volumes fell 4% year over year during the first quarter, although they nonetheless stand 24% above 2019 levels.

While some see Whirlpool’s slowdown as a warning of what’s to come, U.S. demand through March appeared strong. In fact, according to the U.S. Census Bureau, new orders for manufactured durable goods saw 0.8% growth in March. Consumer spending likewise rose 1.1%. Both of these factors serve as strong economic health indicators. Manufacturing, in particular, makes up roughly 12% of the U.S. economy.

Manufacturers’ New Orders: Durable Goods

Source: U.S. Census Bureau

Arcelormittal Expects Up to 1% Drop In Global Steel Demand in 2022

ArcelorMittal SA recently lowered its estimates for global steel demand. The world’s second-largest steelmaker now expects demand to fall up to 1% in 2022. They cite the war in Ukraine and China’s zero-COVID policy, which are slowing the global economic recovery and increasing inflationary pressures. This is a big change from their forecast of 1% growth prior to the Russian invasion.

The European Steel Association (Eurofer) also narrowed its outlook for EU steel consumption in 2022. Thus far, Europe has experienced the brunt of the economic impact from the war in Ukraine. Alongside supply chain disruptions and a “worsening energy crisis,” Eurofer now expects consumption to fall 1.9% in 2022. All this after consumption rebounded by 15.2% in 2021. However, the organization remains optimistic for 2023, projecting an overall 5.1% increase.

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Steel Prices: Actual Metals Prices and Trends

  • Chinese slab prices fell by 5.03% month-over-month to $767 per metric ton as of May 1. Meanwhile, the Chinese billet price decreased by 7.96% to $699.92 per metric ton.
  • Chinese coking coal prices rose 7.63% to $535.64 per metric ton.
  • U.S. three-month HRC futures fell 24.42% to $1,145 per short ton. While the spot price increased by 4.56% to $1,405 from $1,405 per short ton. U.S. shredded scrap steel prices rose by a mere 1% to $606 per short ton.

The Automotive MMI (Monthly Metals Index) held flat from April to May. This was largely the result of a number of factors working in concert. Below, we’ll dig deeper into the automotive marketplace to see if we can determine what to expect for the rest of 2022.

Automotive MMI: China Auto Sales, Production Plunge In April

Source: China Association of Automobile Manufacturers

The data resulting from China’s COVID-zero policies continues to look grim. According to the China Association of Automobile Manufacturers, auto sales and production plunged in April. Specifically, the latter index dropped 46.2% month over month, while overall auto sales fell 47.1%

Shockingly, Tesla saw sales throughout mainland China plummet 98% from March. Meanwhile, production for the automaker also took a substantial hit, with Chinese output falling 81% from 55,462 automobiles to 10,757. As lockdowns and other strict policies remain ongoing, experts predict that much of the impact witnessed in April will bleed into May.

There is some good news on the horizon, however. For instance, COVID-19 case counts in Shanghai continue to fall. According to data released on May 11, daily infections managed to drop beneath 1,500 cases, an 18-day low. Meanwhile, around 612,500 people have tested positive for the virus since March 1.

The stark drop in daily infections signals the possibility of an end to lockdowns within the city. However, officials over in Beijing continue to ramp up pressure on the populace. Aside from closing businesses and schools, all residents are now required to work from home.

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Semiconductor Shortage May Not End Until 2024

According to Intel CEO, Pat Gelsinger, the ongoing semiconductor chip shortage will likely persist until at least 2024. This is a tragic prediction considering how much the current shortage is impacting equipment manufacturing.

Gelsinger previously expected the shortage to resolve by 2023. However, in an interview with CNBC’s TechCheck, she revised her estimate, stating, “that’s part of the reason we believe the overall semiconductor shortage will now drift into 2024 from our earlier estimates in 2023. More shortages now hit equipment, and some of those factory ramps will be more challenged.”

So far, the semiconductor shortage has severely impacted global auto production, especially given the slew of other factors at work. In response, AutoForecast Solutions once again lowered its production estimates for 2022.

The company now expects production in North America and the Asia-Pacific region to fall by 2% to 14.82 million and 46.68 million units, respectively. In Europe, Western and Eastern  production estimates now stand at 11.16 million and 6.26 million.

UK Imposes 35% Duty on Russian Palladium, Platinum

Both palladium and platinum prices saw a modest lift following the UK government’s announcement of a new round of sanctions on Russia and Belarus. As part of the package, the UK will raise tariffs on products including platinum and palladium by 35%.

Russia produces around 40% of global mined palladium and almost 16% of global platinum. This makes the country the world’s largest and second-largest producer with respect to both precious metals. As such, the ongoing war in Ukraine and its effects stand as a leading driver for most of this year’s price fluctuations.

Indeed, both metals previously jumped in early April following a decision by the London Platinum and Palladium Market to suspend two major Russian-government-owned refiners.

MetalMiner’s free weekly newsletter provides up-to-date metal price intelligence on the impact of the war in Ukraine on metal prices and the Automotive MMI.

Actual metals prices and trends

  • The US scrap steel price rose 1% month over month to $606 per short ton as of May 1. Meanwhile, the US HDG price picked up by 2.36% to $1,906 per short ton.
  • US palladium bars rose 2.32% to $2,254 per ounce month over month. Platinum fell 5.25% to $938 per ounce.
  • The Korean 5052 coil premium over 1050 declined 4.83% to $4.53 per kilogram.

 

 

It’s first-year economics: everything comes down to supply and demand. Historically, the push and pull between these two massive market forces are cyclical, and that includes steel. When you have more demand than supply, prices go up. Eventually, the prices get so high that people stop buying. After a while, the steel supply builds up, and prices plummet, leading to a surge in demand once again.

It’s a familiar dance – at least, it used to be. That was before the war in Ukraine, China’s ongoing lock downs, and global supply chain issues. Suddenly, having enough steel supply to meet even lowered demand is not a foregone conclusion. Still, economists aren’t the sort to simply throw up their hands and say, “whatever happens, happens.” Instead, they are constantly mapping out potential scenarios.

In this article, we’ll talk about some of the facts and factors at play.

Is Demand Really Dropping?

We’re one-third the way through 2022, and it seems that no global crisis is too great to completely stave off steel demand. After a year in which steel prices hit historical highs and demand grew by an unexpected 2.1%, many insiders pointed to a “return to center.”

Indeed, in April, the World Steel Association forecasted a meager 0.4% increase in global demand. However, the organization added that they expected this number to slowly increase to 2.2% in 2023. The problem?  Most of these estimates were made long before the current conflict, lockdowns, and supply chain failures.

Is demand really shrinking as much as forecasts predicted, or is the reduction in supply simply making it appear that way? It’s still too early to call. What we do know is that 2022’s supply woes are pushing up steel prices from the back end. This means that the cost relief we all expected simply isn’t coming. Of course, this raises a lot of questions about that 2.1% prediction for 2023.

Stay informed about the latest steel prices, industry news, and market analyses by subscribing to MetalMiner’s weekly newsletter here.

Steel Supply Remains the “X Factor”

Considering all the predictions that 2022 would be a “dead spot” for steel demand, the price action has been stunning thus far. As expected, the year kicked off, with prices quickly retreating from 2021’s historic highs. But by the time March arrived, steel prices had seen their biggest month-over-month increase ever.

This reversal mostly hinged upon Russia’s invasion of Ukraine. The WSA ranks Ukraine as the 13th largest steel producer in the world, as well as the fifth largest exporter of iron by volume. Obviously, the war has devastated the country’s ability to produce. In fact, at the time of this writing, the Azovstal Iron and Steelworks in Mariupol – once capable of putting out 5.9 million tons of product per year – is serving as a shelter for besieged Ukrainian citizens.

The effects of the war have also led to major embargos, sanctions, and boycotts on Russian energy and commodities. Russia is #5 in global steel production, and its metal and coal exports were one of the first things on the chopping block when the EU started imposing sanctions. This means less Russian steel in Europe and less Russian power for European countries to make their own steel.

This would all be bad enough news for steel supply if it weren’t for the recent reports coming out of China, which produces some 56% of the world’s crude steel. Even back in 2021, the steel demand forecast was lowered based on weak economic data. But COVID lockdowns, crowded ports, and decarbonization efforts are choking the eastern giant’s production beyond our wildest fears.

Filling Gaps in Steel Supply

Just last week, MetalMiner posted an article about how India might further establish itself on the global steel stage. After all, despite having a firm grasp on the #2 spot in global steel production, the subcontinent puts up a mere around 1/10th of China’s numbers.  In short: there’s room for improvement. And if there was ever an opportunity to grow market share, this is it.

According to representatives from the Indian steel industry, the problems plaguing Europe and Asia have put the pinch on other major producers. They also claimed that India is currently the only one of those producers stepping up to the plate. In fact, a report from the India Brand Equity Foundation (IBEF) stated that the country’s crude steel production should increase 8-9% year over year in 2022.

So far, that number has averaged closer to 6% due to the increased costs associated with production. Still, with Japan, South Korea, Germany, and other Top 10 producers reporting negative growth, India’s efforts are commendable. How far will this go in making up for the shortfall caused by Russia, Ukraine, and China? Only time will tell.

Second Tier Steel Suppliers Need to Step it Up

Obviously, there’s no timeline in place for either the war or China’s economic woes. This means that other countries will need to join the effort to replenish global steel supply. If consumer demand remains, strong, (a big if) prices could continue to remain supported, at least in theory.

Many of these countries (Taiwan, Italy, Vietnam, Mexico, and France) have their own economic and supply chain woes. Still, Brazil – arguably one of the most imperiled economies in the West – has managed a rather impressive recovery after dropping the ball at the beginning of the year. With any luck, this will help ignite a trend.

Stay informed about fluctuating global steel prices with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge. However, if you want to get a real edge on the metals industry, you can sign up for a demo of our revolutionary insights platform here.

 

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