The Raw Steels Monthly Metals Index (MMI) fell one point further this month, dropping to 89 from the previous 90 reading. Need buying strategies for steel? Try two free months of MetalMiner’s Outlook The Raw Steel MMI has returned to May 2018 levels. The slight drop came as a result of slower domestic steel price […]
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Raw Steels MMI: Steel Prices Sit at More Than Seven-Year High
The Raw Steels Monthly Metals Index (MMI) fell two points this month, dropping to 90 from the previous 92 reading. Domestic steel price momentum continued, as domestic steel prices increased again. Chinese steel prices also increased in June, adding support to domestic steel prices. Need buying strategies for steel? Try two free months of MetalMiner’s […]
Raw Steels MMI: Domestic Steel Price Momentum Continues to Grow
The Raw Steels Monthly Metals Index (MMI) increased three points this month, moving up for a June reading of 92. Need buying strategies for steel? Try two free months of MetalMiner’s Outlook Domestic steel price momentum seems to keep going, with domestic steel prices increasing again. Chinese steel prices also increased in May, adding support […]
Raw Steels MMI: Imports From China Rise Despite Section 232 Tariffs
The Raw Steels Monthly Metals Index (MMI) increased one point this month, moving up to 89. Domestic steel price momentum seems slower than at the beginning of 2018, as domestic steel prices traded more sideways. Need buying strategies for steel? Try two free months of MetalMiner’s Outlook Domestic steel prices remain at a more than […]
Raw Steels MMI: Domestic Steel Price Momentum Picks Up
The Raw Steels MMI (Monthly Metals Index) fell four points this month, dropping to 88. Despite the drop in the Raw Steels MMI, domestic steel price momentum has been on a tear throughout March. All prices for the main forms of flat-rolled steel products have reached more than seven-year highs.
Domestic steel prices accelerated their pace of increases in such a way that HRC domestic prices have risen from the $600-$650/st level to around $850 in the last three months.
[caption id="attachment_91239" align="aligncenter" width="580"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
The steel price increase comes as a result of several factors. First, the long-term trend that started in 2016 created upward movement for steel prices. Second, the delayed steel sector cyclicality (seasonality) has pushed the steel price slope even steeper.
Historically, prices usually increase during Q4 as many companies renegotiate their annual agreements as part of the budgeting season for the following year. However, this year, steel price increases didn’t occur until later. Prices appeared to wait for the Section 232 outcome (with its corresponding tariffs), which acted as a support for domestic steel prices.
However, domestic steel prices seem closer to the end of this latest price rally. Based on historical steel price cyclicality, lower Chinese steel prices and decreasing raw material prices, domestic steel prices may fall in the coming months.
The Divergence in Steel Prices
Chinese steel prices and U.S. steel prices usually trade together. However, the short-term trend sometimes shows some divergences.
Short-term trends may be created by local uncertainty or sudden disruptions with local supply. But these short-term trends tend to correct, and return to their historical pattern.
[caption id="attachment_91240" align="aligncenter" width="580"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
When looking at Chinese and U.S. HRC prices in tandem, the price divergence observed this month leaves no one surprised.
U.S. HRC prices skyrocketed, while Chinese HRC prices continue to fall. It is true that Chinese HRC prices increased sooner in 2017 (starting June 2017), supported by the steel industry cuts in China. The spread between Chinese and domestic steel prices dropped in Q3 2017, as U.S. domestic steel prices traded sideways. The recent drop in Chinese steel prices may create downward price pressure for domestic steel prices.
Global Steel Market
Chinese steel production cuts continue. The city of Handan ordered steel mills to cut around 25% of their steel production to continue the pollution curb measures. These cuts will be extended from April to mid-November. The coking coal industry will also cut production by around 25% over that period. The cuts started on April 1.
According to the Mexican government’s official gazette, the Mexico economy ministry has formally imposed anti-dumping duties on carbon steel pipe imports from South Korea, Spain, India and Ukraine.
Raw Materials
After the prior raw material price increases at the end of 2017, raw material dynamics seem to have slowed down.
Iron ore prices fell sharply in March. Iron ore prices increased slightly at the beginning of this month. However, the sharp decrease in prices last month may not support the current highs in domestic steel prices.
[caption id="attachment_91243" align="aligncenter" width="580"]
Source: MetalMiner analysis of TradingEconomics[/caption]
Coal prices also fell in March. Coal prices seem to be increasing slightly again this month, even if current prices remain far away from the $110/mt highs in January 2018.
[caption id="attachment_91244" align="aligncenter" width="580"]
Source: MetalMiner analysis of TradingEconomics[/caption]
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 to mid- and long-term purchases. Buying organizations looking for more clarity on when to buy and how much to buy of their steel products may want to take a free trial now to our Monthly Metal Buying Outlook.
Actual Raw Steel Prices and Trends
Raw Steels MMI: Steel Prices Gain Momentum in February
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.
[caption id="attachment_90758" align="aligncenter" width="580"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
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.
[caption id="attachment_90759" align="aligncenter" width="580"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
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.
[caption id="attachment_90760" align="aligncenter" width="580"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
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.
MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel
Actual Raw Steel Prices and Trends
Raw Steels MMI: HRC Prices Hit Highest Level in More than Two Years
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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[caption id="attachment_90232" align="aligncenter" width="585"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
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.
[caption id="attachment_90233" align="aligncenter" width="585"]
Source: MetalMiner analysis of WSA data[/caption]
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.
For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook!
Actual Raw Steel Prices and Trends
Raw Steels MMI: Steel Picks Up Speed as Industry Awaits Section 232 Outcome
The Raw Steels MMI (Monthly Metals Index) jumped another 1.3% this month, reaching 83 points in January.
Steel momentum seems to have recovered this month. All forms of steel prices in the U.S. increased sharply. Steel momentum typically begins during the middle of Q4, but the increase occurred later this past year. January’s numbers also look bullish.
Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up
[caption id="attachment_89677" align="aligncenter" width="580"]
U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)[/caption]
In the U.S. market, January will prove to be a decisive month.
The U.S. Secretary of Commerce Wilbur Ross has until mid-January to conclude his Section 232 probes and release a report to the Trump administration, after which the president has 90 days to act.
Shredded Scrap
The long-term shredded scrap price uptrend appears to have turned into a short-term sideways trend. Despite steel price increases in December, January scrap prices decreased.
[caption id="attachment_89678" align="aligncenter" width="580"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
Decreasing domestic scrap prices do not currently support steel prices. However, steel prices appear to be on a sustainable upward trend. Therefore, scrap prices could follow steel prices this month and continue their long-term uptrend.
Chinese Prices Still Strong
Chinese steel prices and U.S. prices usually tend to move similarly. Thus, when one reveals a strong upward or downward movement, the other could follow within that month.
Chinese prices were stronger than U.S. steel prices during November and December 2017. After the latest increase in U.S. steel prices, Chinese prices also continued rising.
[caption id="attachment_89679" align="aligncenter" width="580"]
Source: MetalMiner data from MetalMiner IndX(™)[/caption]
Chinese steel prices have found support from the curtailment campaign in the country. Therefore, steel prices could continue increasing. Chinese Q4 GDP data, expected to show strength, also support Chinese steel prices. Chinese GDP data has come in over annual growth targets for the country.
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 buy some volume. Buying organizations will want to pay close attention to Chinese price trends, lead times and whether domestic mill price hikes stick.
Buying organizations who have 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 February Monthly Outlook will include a detailed analysis of the Section 232 outcome.
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Actual Raw Steel Prices and Trends
