iron ore price

We here at MetalMiner have very cautiously been pointing out the underlying strength of the US construction market and have been dutifully chalking up falling and flat Construction MMI® numbers to low oil prices and cautious banks for nearly a year now.

Construction_Chart_June_2015_FNL

The monthly Construction MMI® registered a value of 75 in June, an increase of 1.4% from 74 in May – not gangbusters construction activity by any stretch of the imagination, but perhaps the beginning of a break in the down-to-flat trend the market has been mired in since last year.

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There are several good reasons to believe this is a turning point in the price of construction metals such as H-beams, steel rebar and shredded scrap. Reasons that go far beyond our belief that bad weather, higher break-even points for energy projects and a lack of willingness from lenders are what has held them back thus far.

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Steel prices remain at their lowest levels. Almost every industrial metal price rose in April as a weaker dollar gave a boost to commodity markets. However, steel prices remained quiet, hanging at record lows.

Raw-Steels_Chart_May-2015_FNL

The monthly raw steels MMI® registered a value of 60 in May, on par with April’s value.

Raw Materials Undercutting Scrap

Scrap prices are at their lowest levels and we don’t really see anything that could give prices significant momentum on the upside, at least until a bigger supply response is seen.

Why Manufacturers Need to Ditch Purchase Price Variance

Unless we start seeing the dollar depreciate against other currencies, European scrap exports will keep gaining market share, leaving a supply excess for US steelmakers.

Cheaper to Produce

Moreover, although prices seem low, it’s still cheaper to make steel still using iron ore than scrap. Pig iron or billet could substitute some scrap as primary raw material in which case, US exporters would sell more in the domestic market, causing US scrap prices to keep falling lower.

Meanwhile, steel imports keep arriving. Since US prices are no longer inflated compared to the rest of the world ,we would imagine steel imports will start slowing down through the remainder of the year. However, Chinese exports could actually increase due to the recent removal of export tariffs.

Either way, steel demand remains weak, particularly in oil and gas tubular markets while the market remains oversupplied. It doesn’t seem likely that steel prices will rise significantly higher this year.

May Steel Prices

Last month, the steel billet 3-month price rose 3.3% on the LME to $315.00 per metric ton. US shredded scrap saw its price rise 0.8% to $250.00 per short ton.

* Get the complete prices every day on the MetalMiner IndX℠

The spot price of the US HRC futures contract closed the month at $450.00 per short ton after dropping 5.3%. Korean steel scrap prices fell 3.6% to $124.29 per metric ton. After rising the previous month, Chinese slab prices dropped 2.8% to $388.47 per metric ton. The US HRC futures contract 3-month price fell a slight 2.5% over the past month to $512.00 per short ton. The steel billet cash price ended the month on the LME at $300.00 per metric ton, down from $300.00.

Prices for Chinese billet remained constant this past month, holding at around $333.66 per metric ton. Chinese coking coal held pat last month at $174.08 per metric ton. Hovering around $491.59 per metric ton for the month, Korean pig iron remained unchanged.

The Raw Steels MMI® collects and weights 13 global steel and raw material price points to provide a unique view into global steel price trends over a 30-day period. For more information on the Raw Steels MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

Outlays for US construction projects fell 0.6% in March to a seasonally adjusted annual rate of $967 billion, the US Commerce Department said last week. Commerce also revised February’s result to show almost no change.

Why Manufacturers Need to Ditch Purchase Price Variance

Despite the lower spending, the monthly Construction MMI® registered a value of 74 in May, on par with April’s value. Flat is, apparently, the new up until construction starts and spending pick up some steam. The low prices have not yet incentivized developers enough, it would seem, to sign off on new projects or increase purchasing for anything but stockpiling, as credit is still hard to obtain and consumer demand for commercial and residential space remain tepid.

Construction_Chart_May-2015_FNLThe energy sector, which accounted for much of last year’s construction gains, is still shrinking due to rebounding-but-still-low oil prices which are causing projects to get canceled. Oil, itself, has become too cheap to go to the expense of pulling it out of the ground for producers to turn a profit selling it. Read more

Today in MetalCrawler, the sleepy iron ore market was jolted to life. Is it a shift from the bearish trends we’ve seen lately? Only time will tell.

BHP Dials Back Mining Expansion

Iron ore advanced after BHP Billiton Ltd. curbed expansion plans and supplies from higher-cost mines dropped, easing concern that global output will outpace demand and feed a global glut. Miners’ shares jumped.

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Ore with 62% content at Qingdao, China, rose 5.5% to $57.81 a metric ton early today, its highest since March 16. Benchmark iron ore is still 60% below the peak of $144.18 reached in August 2013. Visit our MetalMiner Indx for the latest prices.

Exports Fall For the Quarter

The Sydney Morning Herald’s Peter Ker writes that the week’s iron ore moves could have a major impact on markets if other producers follow BHP’s lead and constrain supply. Across Rio Tinto Group, Vale SA, Fortescue Metals Group, Arrium Limited, Mt. Gibson Iron and Grange Resources, exports were more than 19 million mt lower this quarter than in the December quarter, raising questions about why the iron ore price has fallen 28% during a period of supply weakness.

 

The American Institute of Architects‘ Architecture Billings Index came in positive, again, in March, but its relatively low increase again reflected the weak recovery in both design and construction. The March ABI score was 51.7, up from a mark of 50.4 in February.

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“Business conditions at architecture firms generally are quite healthy across the country. However, billings at firms in the Northeast were set back with the severe weather conditions, and this weakness is apparent in the March figures,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The multi-family residential market has seen its first occurrence of back-to-back negative months for the first time since 2011, while the institutional and commercial sectors are both on solid footing.”

Multi-Family Weakness

We have reported on the general weakness in multi-family residential and its effect on prices of construction materials such as structural steel and copper for much of the first quarter of 2015.

AIA prepared a video featuring Baker, recorded in a swanky Architect Magazine studio overlooking our nation’s capital, describing the macroeconomic issues facing the construction market, which include the strong dollar and the continuing shortage of skilled construction labor, in Q2 and the rest of the year. Read more

Steel held its price for the first time in seven months, breaking a string of losses that most market observers expected would continue.

Raw-Steels_Chart_April-2015_FNL

The monthly Raw Steels MMI® registered a value of 60 in April, on par with March’s value.

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Continuing low prices for iron ore and a generally weak scrap market are causing a deflationary spiral for most grades of steel. Read more

The once-robust global construction market fell further this month as, here in the US, oil price-cutting by OPEC has caused large oil and gas projects to fall below their breakeven payback points.

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Heavy energy construction has fallen and the fragile single-family home market is not strong enough to pick up the slack.

Construction_Chart_April-2015_FNL

The monthly Construction MMI® registered a value of 74 in April, a decrease of 1.3% from 75 in March. Read more

After its first negative score in 10 months, the Architecture Billings Index (ABI) showed a small increase in design activity in February, and has been positive 10 out of the past 12 months.

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As an economic indicator of construction activity, the ABI reflects a 9-to-12-month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 50.4, up slightly from a mark of 49.9 in January. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings).

Questions about the uneven recovery in both residential and commercial construction are keeping the US architectural design market from growing more than the slight increases and small decrease of recent months.

Meanwhile, in terms of metal materials prices, Chinese H-beam steel was the biggest gainer on MetalMiner‘s weekly Construction MMI®, an index tracking a basket of metals used by the construction industry. (All metals and prices within the index available at the bottom of this article.)

Health of Major US Construction Sectors

“The health of the institutional market has been the key factor for positive business conditions for the design and construction industry in recent months, and it is encouraging to see that sector remain on solid footing,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, we’re seeing some slowing in the other major construction sectors. Design billings for residential projects had its first negative month in more than three years, and commercial design billings have seen only modest growth in recent years.”

A sector that’s not covered by the ABI, infrastructure spending, is experiencing growing pains, as well. Many economists are projecting that the Federal Reserve will raise interest rates this summer, which could increase borrowing costs and potentially affect infrastructure construction, according to US News and World Report. Several economists say that infrastructure spending is badly needed and that Congress should look at alternative ways to fund construction, including raising the gas tax and increasing public-private partnerships.

Residential and commercial construction could see a lack of available credit, as well, if the Fed signals that interest rates could rise sooner rather than later.

Key February ABI Highlights

  • Regional averages: South (52.5), Midwest (50.2), Northeast (48.0), West (46.7)
  • Sector index breakdown: institutional (52.2), commercial / industrial (51.4), multifamily residential (48.9), mixed practice (45.3)
  • Design contracts index: 50.0

Actual Construction MMI Weekly Prices

Chinese H-beam steel saw the largest upwards shift on the weekly Construction MMI®, rising 2.6% to settle at CNY 2,350 ($375.18) per metric ton. The price of US shredded scrap increased by a slight 0.8% over the past week to $248.00 per short ton. This past week, the Chinese low price of 62% Australian iron ore fines kept quiet, holding at at CNY 480.00 ($76.64) per dry metric ton. Chinese rebar prices held steady from the previous week at CNY 2,480 ($395.93) per metric ton.

* Get the complete prices every day on the MetalMiner IndX℠

The price of Chinese aluminum bar rose 0.7% to CNY 13,690 ($2,186) per metric ton after falling 0.4% during the previous week. Following a steady week, prices for European 1050 aluminum closed flat at EUR 2,606 ($2,749) per metric ton.

The weekly US Gulf Coast bar fuel surcharge fell 2.0% for the week to settle at $0.31 per mile. Following a 0.1% increase in the week prior, the weekly US Midwest bar fuel surcharge fell 1.9% last week to $0.32 per mile. The weekly US Rocky Mountain bar fuel surcharge shifted up 0.7% to close at $0.32 per mile this week.

The Construction MMI® collects and weights 9 metal price points used within the construction industry to provide a unique view into construction industry price trends. For more information on the Construction MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

U.S. Steel on Thursday announced more layoffs as it continues to fight lower-priced, surging imports and declining demand in the energy sector, saying it will temporarily idle one of its iron-ore operations in Minnesota, affecting 412 workers.

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The idling of the plant in Keewatin, Minn., which ships to U.S. Steel mills, will take place on May 13 and affects six million tons of iron-ore production capacity, or 27% of U.S. Steel’s overall iron-ore output last year. U.S. Steel said the move is temporary in a statement.

The week’s biggest mover on the weekly Raw Steels MMI® was the 3-month price of the US HRC futures contract, which saw a 1.0% increase to $520.00 per short ton. This comes on the heels of a 0.8% decline the week prior. US shredded scrap traded sideways last week, hovering around $246.00 per short ton. The spot price of the US HRC futures contract stayed essentially flat at $500.00 per short ton.

After falling 3.5%, Korean steel scrap landed at KRW 139,000 ($123.34) per metric ton and making it the week’s biggest mover on the weekly Raw Steels MMI®. Prices for Korean pig iron remained constant, closing the week at KRW 530,000 ($470.27) per metric ton.

* Get the complete prices every day on the MetalMiner IndX℠

Chinese steel prices were mixed for the week. The price of iron ore 58% fines from India hit a high price of CNY 450.00 ($71.83) and a low price of CNY 445.00 ($71.03) per dry metric ton. Chinese slab finished the week at CNY 2,380 ($380.10) per metric ton after falling 3.3%. Following a 1.6% increase in the week prior, the price of Chinese HRC fell 0.8% last week to CNY 2,510 ($400.86) per metric ton. At CNY 1,080 ($172.40) per metric ton, the price of Chinese coking coal did not change since the previous week.

Following a steady week, prices for on the LME the steel billet 3-month price closed flat at $305.00 per metric ton. Also on the LME, the cash price of steel billet closed at $305.00 per metric ton after a flat week.

The US HRC futures contract 3-month price rose 1.0% to $520.00 per short ton after falling 0.8% during the previous week. US shredded scrap remained essentially flat from the previous week at $246.00 per short ton. At $500.00 per short ton, the spot price of the US HRC futures contract remained essentially flat.

The Raw Steels MMI® collects and weights 13 global steel and raw material price points to provide a unique view into global steel price trends. For more information on the Raw Steels MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

The steel prices plummet continued this month in the the monthly Raw Steels MMI® and registered a value of 60, a decrease of 11.8% from 68 in February.

Raw-Steels_Chart_March-2015_FNL

*Note: Effective 12/1/14, MetalMiner updated some of the source data from China used to calculate this index. Therefore the December index reading appeared a little more volatile when compared to the November reading. However, any movements thereafter reflect only market price changes as opposed to market and source data prices changes.

In February steel prices fell sharply, not only for semifinished products but scrap prices hit the wall as well. Steel billet fell more than 50% this month for both the spot and 3-month contracts on the London Metal Exchange.

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In January, the global scrap to billet price spread fell to less than $100 a metric ton. This level was unsustainable since melting scrap to make billet is already more expensive than that. For that spread to look more stable scrap prices needed to drop and boy, did they ever.

No Relief For Finished Steel Products

Meanwhile, steel products can’t catch a break. According to recent figures released by the American Iron and Steel Institute (AISI), US steel imports rose 33% in January compared with the year before, reaching 3.85 million tons, compared with 2.9 million tons a year earlier. As a result, US producers keep cutting prices to compete with imports.

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