steel price
steel mill production line

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The Raw Steels Monthly Metals Index (MMI) increased by 4.3% for this month’s value. 

September 2020 Raw Steels MMI chart

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U.S. steel prices start increasing

HRC prices increased by over 5.4% throughout August, closing at $486/st. During the first two weeks of September, the price rallied up to $521/st.

Meanwhile, Chinese HRC prices mostly traded sideways during August and the first two weeks of September.

The recovery of the U.S. auto industry might be driving the steel price increases.

U.S. auto production continued to improve. Producers such as General Motors, Ford and Fiat Chrysler ramped up their assembly plants.

However, supply has not quite caught up with demand. As such, U.S. auto inventory continues to tighten.

By the end of June, vehicle inventory fell to 2.6 million, or 33% fewer units year over year. Pundits suggest U.S. auto sales will reach an annualized 13.5 million unit rate for 2020, with stronger demand coming in 2021.

The aforementioned factors have not only supported the U.S. HRC price; HDG prices also surged.

The U.S. HDG price only increased by 5.6% throughout August, reaching $736/st, but found further support during the first two weeks of September. By the end of the second week of September, HDG broke resistance to $788/st.

Chinese steel market

After record imports in July, China’s iron ore imports in August fell 10.9%.

The General Administration of Customs reported China imported 100.36 million tons of iron ore throughout August, while consumers bought 112.65 million tons in July. However, imports increased 5.8% year over year.

According to Tang Binghua, of Founder CIFCO Futures, imports slowed in August partly due to port congestion from coronavirus-related restrictions. In addition, fewer shipments came from Australia as it closed its financial year.

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steel

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This morning in metals news: U.S. steel capacity utilization reached 65.1% for the week ending Sept. 12, the World Trade Organization released a report covering the U.S.’s Section 301 tariffs on Chinese goods; and the copper price approached a two-year high.

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U.S. steel capacity utilization rises to 65.1%

The U.S. steel sector’s capacity utilization rate reached 65.1% for the week ending Sept. 12, the American Iron and Steel Institute (AISI) reported.

Production during the week totaled 1.46 million net tons, down 19% year over year but up 2.2% from the previous week. Capacity utilization for the week ending Sept. 5 reached 63.7%.

However, production for the same week in 2019 reached 1.80 million net tons.

WTO releases report on U.S.’s China tariffs

The WTO this week released a report of its findings related to the U.S.’s Section 301 tariffs on Chinese goods, which amounted to hundreds of billions of dollars.

The report comes more than two years after China requested consultations — in April 2018 — related to the U.S. tariffs.

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After dipping two weeks ago, the U.S. steel sector’s capacity utilization rate for the week ending Sept. 5 bounced back.

Steel mills produced at a rate of 63.7% during the week ending Sept. 5, 2020, according to the American Iron and Steel Institute (AISI). The rate marked an increase from the 61.7% recorded the prior week (when it had fallen from 63.0% the week before that).

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Production hits 1.43M tons

Steel output for the week ending Sept. 5 totaled 1.43 million net tons.

The weekly production total marked a 21.2% decline compared to the week ending Sept. 5, 2019, when capacity utilization reached 78.0%.

Meanwhile, production last week marked a 3.3% increase from the week ending Aug. 29.

Year-to-date output down by one-fifth

Buoyed in part by a recovery in automotive demand, the steel capacity utilization rate has made gains in recent months.

However, for the year to date, the capacity rate and overall output remain down compared to 2019 levels.

Year-to-date steel output totaled 53.27 million net tons, down from 66.73 million net tons for the same period in 2019. The capacity utilization rate for the same period last year reached 80.6%.

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scrap steel

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Pandemic-related lockdowns constrained the global scrap market earlier this year. Consequently, operations were restricted or closed down.

But even as containments have eased, the market has been slow to come back — resulting in rising prices for steel and base metal scrap over the summer.

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New EAF capacity coming onstream

Steel, in particular, is facing not one but two constraints.

On the one hand, as new electric arc furnace (EAF) steelmaking capacity has come onstream — with more planned to come onstream in the years ahead — steel scrap demand in the U.S. is likely to remain robust, even if the wider finished steel market remains under pressure from imports and only slowly recovering demand.

Meanwhile, China has not historically been a large producer of steel via the EAF route. However, the flexibility that the process affords and its lower environmental impact is attracting significant investment, spurring the country’s demand for more scrap.

As a result, steelmakers in China and their trade associations have been taking measures to make imported ferrous scrap shipments more welcome. They are trying to have scrap reclassified as a “resource,” according to Recycling Today.

Differing perspectives on nonferrous vs. steel scrap

Traditionally, China has treated metal scrap imports rather like general waste imports.

China in the past has even branded imported non-ferrous scrap as “foreign garbage,” according to the aforementioned article. The country has limited volumes with strict quota rules, which will decline to zero for base non-ferrous metals by 2021.

On the other hand, China is reviewing its steel scrap quotas, with a view toward relaxing them. Most expect import volumes to surge from early next year. As a result, that could potentially putting pressure on prices in an already constrained global market.

Scrap prices rose last month in Europe when Turkish buyers came back into the market. Those buyers had to bid for packages, even as their traditional U.S. sources were also facing limited availability.

All this is not to suggest we are facing runaway inflation in steel scrap prices.

Steel production generally is muted in most markets. Furthermore, finished steel prices are under pressure. However, there is a growing case, both economically and environmentally, for EAF production over the traditional iron ore-based blast furnace route.

That means there will be more buyers bidding for the finite supplies in the year ahead.

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After a long stretch of weekly increases, the U.S. steel sector’s capacity utilization rate fell last week.

According to the American Iron and Steel Institute (AISI), U.S. steel mills produced at a capacity utilization rate of 61.7% for the week ending Aug. 29. The rate marked a decline from the 63.0% recorded for the week ending Aug. 22.

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Output drops 2.1%

In terms of tonnage, production last week reached 1.38 million net tons, down 2.1% from the previous week.

On a year-over-year basis, production last week fell 24.9%. During the same week in 2019, production totaled 1.84 million net tons at a capacity utilization rate of 79.1%.

For the year to date (through Aug. 29), production reached 51.84 million net tons at a capacity utilization rate of 66.0%.

The year-to-date total marked a 20.1% year-over-year decrease from last year’s 64.92 million net tons (when the capacity utilization rate reached 80.7%).

Production by region

Meanwhile, broken down by region, production for the week ending Aug. 29, 2020, totaled:

  • Northeast: 113,000 net tons
  • Great Lakes: 478,000 net tons
  • Midwest: 162,000 net tons
  • Southern: 556,000 net tons
  • Western: 74,000 net tons

Price movements

Despite a recovery in automotive demand, not much else has supported steel prices of late.

In late August, however, steel prices did show some signs of upward movement.

For example, after falling to $454/st as of Aug. 20, U.S. HRC closed last week at $486/st. The U.S. HRC price is up 2.32% from the previous month.

Similarly, U.S. HDG traded sideways for much of August. After sitting at around $698/st for much of the month, the price closed last week at $736/st. The U.S. HDG price is up 3.66% month over month.

Finally, the U.S. HRC price also traded sideways for most of August. The price sat at around $640/st for much of the month before ticking up last week, closing at $660/st. On a month-over-month basis, however, the price fell modestly (by 0.9%).

Further analysis and commentary regarding both the U.S. and Chinese steel markets will appear in the September Monthly Metal Outlook (MMO) report, which will be released Tuesday, Sept. 1.

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copper smelter

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This morning in metals news: copper on the SHFE is headed for its fifth straight month of price increases; a Swedish joint venture is ramping up its efforts toward producing fossil-fuel-free steel; and Mexico is instituting a new export pre-approval process to avoid reimposition of steel tariffs by U.S. President Donald Trump.

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SHFE copper on the rise again

The SHFE copper price is headed for a fifth straight month of price rises, Reuters reported.

According to the report, the five-month streak marks the longest such upward rise in 11 years.

Swedish JV eyes fossil-fuel-free steel production

A joint venture in Sweden, Hybrit, is looking to make big changes to how steel is produced.

In particular, the JV is looking to remove coking coal from the equation, Bloomberg reports. Instead, the steel production process would feature hydrogen and other forms of clean energy.

SSAB AB, LKAB and Vattenfall AB are the operators of the JV.

Mexico to institute steel export pre-approval process

On the heels of President Donald Trump’s recent reimposition of the 10% Section 232 tariff on some Canadian aluminum, the Mexican government is hoping to avoid a similar outcome for its steel exports to the U.S.

According to Bloomberg, Mexico is putting into place a new pre-approval process for steel exports.

In short, the approval process — which would go into effect Sept. 4 — would confirm the steel exports did not pass through a third country.

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China and India flags

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This morning in metals news: China’s steel purchases from neighbor India have jumped this year; Japan’s Nippon Steel is wary of China’s steel dominance; and the U.S. trade deficit in goods increased in July.

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China ramps up Indian steel purchases

Despite border tensions earlier this year that led to skirmishes between Chinese and Indian soldiers, China continued to buy record amounts of Indian steel.

Between April and July, Indian steel exports reached their highest level in six years, Reuters reported. Furthermore, China’s share of those exports reached its highest level ever.

China’s steel sector against the world

Speaking of China and steel, the executive vice president of Nippon Steel Corp. expressed concern over the fact that China could be set to further control the global steel market.

“Chinese steelmakers are working hard on product development,” Katsuhiro Miyamoto, executive vice president of Nippon Steel Corp., Bloomberg quoted him as saying. “We must stay ahead of them.”

U.S. trade deficit in July

The U.S. trade deficit in goods reached $79.3 billion in July, the U.S. Census Bureau reported.

The July deficit compared with the $71.0 billion deficit in June.

Exports totaled $115 billion, while imports reached $194 billion.

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steel imports

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U.S. steel imports picked up in July, the U.S. Census Bureau reported in its monthly steel import data release today.

U.S. imports of steel reached an estimated 2.4 million metric tons in July, nearly doubling the 1.3 million metric tons imported the previous month.

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Rises in imports of rebar, blooms, billets and slabs

“The July change in steel imports based on metric tonnage reflected increases in blooms, billets, and slabs; galvanized hot dipped sheets; and reinforcing bars,” the Census Bureau reported. “Decreases occurred in oil country goods, line pipe, and standard rails. Increases occurred primarily with Brazil.”

Imports from Brazil reached 1.12 million metric tons in July, up from 21,067 metric tons the previous month and 910,976 metric tons in July 2019.

Rebar imports totaled 113,567 metric tons in July, up from 70,447 metric tons in June.

June imports of blooms, billets and slabs reached 72,334 metric tons. In July, that import figure skyrocketed to 1.20 million metric tons. July 2019 imports, however, reached 1.07 million metric tons.

Year-to-date imports remain down

Steel imports for the year to date, however, are down compared to 2019.

For the year to date through June 2020, the U.S. imported 11.2 million metric tons of steel. Meanwhile, for the same period in 2019, the U.S. imported 14.2 million metric tons.

“The largest commodity decrease occurred primarily in oil country goods,” the Census Bureau said. “Increases occurred primarily in tin free steel; light shaped bars; and pipe and tubing.”

Imports of wire rod, meanwhile, fell to 348,614 metric tons from 511,447 metric tons in 2019.

By country, the largest year-to-date decreases in imports came from Russia and Korea. The largest imports increases came from Canada, Mexico, and Turkey.

Falling OCG imports

July imports of oil country goods reached 62,490 metric tons, down from 97,710 metric tons in June.

Through the first half of 2020, imports of oil country goods totaled 704,231 metric tons, down from 1.31 million metric tons in H1 2019.

The decline in oil country goods imports comes as oil prices have languished.

The WTI crude oil price reached $42.62/barrel on Monday, down slightly from the prior week, according to the Energy Information Administration. Meanwhile, the WTI price came in down $11.55/barrel from the price a year ago.

However, the oil price has recovered in recent months after plummeting into negative territory in April.

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Despite China’s ramping up of its steel output, global steel output declined in July 2020.

According to the most recent reporting from the World Steel Association, global crude steel production fell 2.5% in July on a year over year basis.

Production for the month totaled 152.7 million metric tons, according to the World Steel Association.

“Due to the ongoing difficulties presented by the COVID-19 pandemic, many of this month’s figures are estimates that may be revised with next month’s production update,” the association noted.

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China’s production continues to soar

While steel demand might be lagging in the rest of the world, China’s steel demand is strong (as Maria Rosa Gobitz recently noted in her Raw Steels MMI report).

China’s production totaled produced 93.4 million metric tons of crude steel in July 2020, or up 9.1% compared to July 2019.

Other top steel producers in Asia, however, were not as productive. Japan produced 6.0 million tons, down 27.9% year over year. Meanwhile, South Korea’s production fell 8.3% to 5.5 million tons.

Elsewhere, German production dropped 24.7% to 2.4 million tons. Total estimated E.U. production reached 9.8 million tons, or down 24.4%.

Production in the Commonwealth of Independent States (CIS) reached an estimated 8.1 million, or down 5.8% from July 2019.

Ukraine production fell 1.9% to 1.8 million tons. Turkey’s production, meanwhile, rose 7.4% to 3.1 million tons.

U.S. steel sector ramps up

U.S. production fell 29.4% year over to 5.2 million tons in July, according to the World Steel Association’s reporting.

However, as we’ve noted here on a weekly basis, the U.S. steel sector’s capacity utilization rate has posted incremental increases in recent months.

U.S. steel mills produced at a capacity utilization rate of 63.0% during the week ending Aug. 22, up from 61.5%, according to the American Iron and Steel Institute.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

metalworking

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This week, we wrapped up our Monthly Metals Index (MMI) series for the month, including coverage of the renewables sector, stainless steel surcharges and steel demand in China.

Furthermore, MetalMiner’s Stuart Burns delved into supply-side impacts on lead, copper and zinc.

In other economic indicators, U.S. housing starts surged in July — a bright spot in what has been a challenging year for the U.S. economy.

Stop obsessing about actual forecasted metals prices. It’s more important to spot the trend. See why.

Week in Review, Aug. 17-21

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