steel price

The U.S. steel sector reached a capacity utilization rate of 82.3% for the year through Jan. 18, according to the American Iron and Steel Institute (AISI).

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Production for the year to date reached 4.94 million tons, up 2.6% from production during the same period last year (when capacity utilization rate reached 80.4%).

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals coverage here on MetalMiner, including: steel prices, commodities markets, precious metals, the U.S.-China Phase One trade deal and the Senate’s approval of the United States-Mexico-Canada Agreement.

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This morning in metals news, aluminum maker Alcoa released its financial results for Q4 and 2019, an Ohio steel plant touts investment that it says will bring new jobs and a Pittsburgh-based metals manufacturer says it will have to close a facility unless it wins a steel tariff exemption.

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Alcoa releases quarterly financials

Aluminum maker Alcoa reported a net loss of $303 million ($57 million excluding special items) in Q4 2019.

Fourth-quarter revenue came in at $2.4 billion, down from $2.6 billion the previous quarter and $3.3 billion in Q4 2018.

“In 2019, we acted to further strengthen Alcoa, completing the divestiture of uncompetitive assets, modernizing labor agreements in three countries, implementing a new operating model, and making quick progress on the asset review process we announced last quarter,” Alcoa President and CEO Roy Harvey said.

“While the market in alumina and aluminum challenged us, we maintained a strong cash balance of nearly $900 million and drove operational stability,” Harvey said. “Also, our low-cost, top-tier bauxite and alumina segments both set new annual production records based on our current portfolio.”

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This morning in metals news, the U.S. and China will ink the previously agreed “phase one” trade deal today, the United States-Mexico-Canada Agreement (USMCA) is expected to be up for a vote in the U.S. Senate soon and China’s steel mills may be looking away from higher-grade iron ores.

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U.S., China to sign preliminary trade deal

After many turbulent months that saw an escalation of trade tensions, the U.S. and China are finally set to sign a so-called “phase one” trade deal today that, while it doesn’t mark an end to the trade war, at least constitutes a de-escalation.

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The Raw Steels Monthly Metals Index (MMI) showed some strength again this month with another three-point increase, rising to 72.

U.S. HRC and scrap prices increased quite a bit, while LME billet prices also registered double-digit increases.

Key forms of steel increased across the board in the first half of December 2019. Plate prices increased the most, with prices spiking a couple of times during the month.

Source: MetalMiner data from MetalMiner IndX(™)

However, HRC, CRC and HDG increases lost some steam later in December.

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According to recent data from the American Iron and Steel Institute (AISI), U.S. raw steel production for the year through Dec. 21, 2019, had increased 1.8% compared with the same period in 2018.

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Production for the nearly full year in 2019 totaled 94.45 million tons, according to the report, at a capacity utilization rate of 80.1%. The figure marked a 1.8% increase from the 92.78 million tons produced during the same period in 2018 (when the capacity utilization rate hit 78.2%).

Meanwhile, for the week ending Dec. 21, 2019, production totaled 1.87 million tons at a capacity utilization rate of 80.7%. The weekly production total marked a 0.3% increase from the 1.86 million tons produced during the same week in 2018 (when the capacity utilization rate reached 79.4%).

Furthermore, production for the week ending Dec. 21, 2019, marked a 1.2% increase compared with the previous week, when production reached 1.84 million tons at a capacity utilization rate of 79.7%.

The steel industry’s capacity utilization rate reached as high as 81.9% earlier in the year. The U.S. Department of Commerce, when it implemented Section 232 tariffs on imported steel in March 2018, identified the 80% mark as a target to be reached for the domestic steel sector.

Broken down by region, production totals for the week ending Dec. 21, 2019, reached:

  • Northeast: 207,000 tons
  • Great Lakes: 681,000 tons
  • Midwest: 194,000 tons
  • Southern: 695,000 tons
  • Western: 89,000 tons

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U.S. steel prices picked up near the tail end of 2019 after slumping throughout the year.

As of Christmas week, the U.S. HRC price reached $560/st, up 7.69% from the same time the previous month, according to MetalMiner IndX data.

U.S. HDG reached $834/st, up 5.3% on a month-over-month basis.

U.S. CRC ticked up to $754/st, up 6.35% on a month-over-month basis.

The U.S. plate price reached $694/st, up 12.85% from the same time the previous month.

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In its final quarterly report of the year, U.S. Steel last week cited a need to change to mitigate factors outside of its control.

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Changes have come of late in the form of job losses and plant closures. Last week, U.S. Steel announced the closure of a Michigan plant, leading to more than 1,545 layoffs at its Great Lakes Works plant in Ecorse, Michigan.

“We understand the impact today’s announcement to indefinitely idle Great Lakes Works has on many of our stakeholders, and we are acting now to reposition U. S. Steel around a footprint differentiated based on cost or capability,” President and CEO David B. Burritt said in the firm’s earnings release.

Burritt continued, acknowledging the steelmaker needs to adapt.

“While the current realities of the markets we serve are having a significant impact on our short-term results, we are taking swift action to align our operational footprint and financial strategy with our customers’ future to ensure we continue executing our ‘best of both’ integrated and mini-mill technology strategy,” Burritt continued.

“Fourth quarter expected results confirm the need to change to make the business more resistant to factors outside of our control. While the decisions being made are difficult, we believe they allow us to drive increased stockholder value as we move towards our future faster with a more capital efficient footprint.”

The steelmaker reported a loss of $25 million in the fourth quarter, citing weakness in its European and tubular segments. U.S. Steel forecast a diluted loss per share of $1.15 in the fourth quarter.

The steelmaker estimates full-year adjusted EBITDA of $682 million, excluding “approximately $285 million of estimated restructuring and other charges and approximately $47 million of estimated impacts from the December 24, 2018 fire at our Clairton coke making facility.”

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U.S. Steel shares dropped nearly 11% last Friday, down to $11.92 per share, following the earnings report and news of the Michigan layoffs.

It may have taken well over 850 days for its culmination, but the recent completion of an acquisition in India is being touted as the “single-biggest recovery” under the Insolvency and Bankruptcy Code (IBC) process in India.

Earlier this week, global steel giant ArcelorMittal announced it had formally completed the acquisition of debt-ridden Essar Steel India Ltd (ESIL).

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Going ahead, the LN Mittal-led company also announced a joint venture with Nippon Steel, called AM/NS India, to own and operate the debt-ridden Essar.

ArcelorMittal holds 60% of AM/NS India, with Nippon Steel holding the balance.

Last month, the Supreme Court of India cleared the decks for the acquisition of Essar, which is mired in multimillion-dollar debt.

On taking over, the co-owners have announced their resolve to “play an active role in the Indian steel market.” They have decided to step up capacity at the plant from the current 9.6 million ton per annum (mtpa) to 12 or 15 mtpa, according to LiveMint.

As widely reported in the Indian press, Lakshmi Mittal, chairman and chief executive of ArcelorMittal, said this acquisition was an “important strategic step for ArcelorMittal.” India, he added, was an attractive market, and ArcelorMittal had been on the lookout for opportunities to build a meaningful production presence in the country for over a decade.

What attracted it to ESIL was its sizable, profitable, well-located operations.

Incidentally, AM/NS India is an integrated flat steel producer and the largest steel company in western India. Its current level of crude steel production is about 7.5 mtpa against a 9.6 mtpa capacity.

Following the completion of the acquisition process, ArcelorMittal has initiated payment of the dues. Payment from ArcelorMittal has started flowing, with all payments likely to be cleared soon, Business Today reported.

For many years, AM/NS has been investing in countries like the U.S., Brazil and Japan. Its India plans include an intention to increase finished steel shipments to 8.5 mtpa over the medium term, The Hindustan Times reported. This will be achieved by initially completing ongoing capital expenditure projects and infusing expertise and best practice to deliver efficiency gains — and then through the commissioning of additional assets — while simultaneously improving product quality and grades to realize better margins, the company said in a statement.

The promise after this major acquisition of adding more steel to India’s total production may all be fine — but in the face of a slow growth, what will this additional capacity do to it is a question on every analyst’s mind.

Domestic steel prices have fallen by around 10% since the start of 2019. Domestic demand has also slowed, and is estimated to fall to 4-5% this fiscal from the 7.5-8% growth recorded in the previous two years, given muted construction investments and weak automotive market,” according to Crisil.

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All hopes are now pinned on an infrastructure boost promised by the Indian government as part of a larger package aimed at spurring economic growth, which, in turn, could fuel steel consumption.

The U.S. steel industry’s capacity utilization rate for the year through Dec. 14 held at 80.1% for the second straight week, according to weekly production reported by the American Iron and Steel Institute (AISI).

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The U.S. steel industry churned out 92.6 million tons of steel for the year through Dec. 14, marking a 1.8% increase compared with production during the same period in 2018 (when production reached 90.9 million tons at a capacity utilization rate of 78.2%).

Meanwhile, production for the week ending Dec. 14 reached 1.84 million tons at a capacity utilization rate of 79.7%. That weekly production total marked a 0.9% decrease from production during the same week in 2018, which totaled 1.86 million tons at a capacity utilization rate of 79.4%.

Production for the week ending Dec. 14 rose 1.3% compared with production for the week ending Dec. 7, 2019 (when production totaled 1.82 million tons at a capacity utilization rate of 78.2%).

By region, production for the week ending Dec. 14, 2019, totaled:

  • Northeast: 212,000 tons
  • Great Lakes: 681,000 tons
  • Midwest: 192,000 tons
  • Southern: 669,000 tons
  • Western: 90,000 tons

Steel prices, meanwhile, have been rising on the heels of price increases imposed by major U.S. steel producers.

U.S. HRC is up 9.59% over the last month, up to $560/st, according to MetalMiner IndX data. U.S. HDG, meanwhile, is up 7.01% to $824/st. U.S. CRC is up 6.99% to $750/st.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

U.S. plate prices were late to the party, but plate has increased 13.58% over the last month, climbing to $694/st.

The Raw Steels Monthly Metals Index (MMI) showed some strength this month with a three-point increase, rising to 69 from 66 last month.

U.S. steel prices rebounded in November when recent mill prices increases took effect.

Source: MetalMiner data from MetalMiner IndX(™)

Once again, plate price increases have lagged behind the other forms, (similar to July, when plate prices failed to gain):

Source: MetalMiner data from MetalMiner IndX(™)

However, plate prices now look in line with historical norms, in terms of relative values across key types. Plate prices may now begin to move with other prices, rather than on a unique trajectory.

U.S. capacity utilization slipped below 80% during late November. The rate stayed lower during the week ending Dec. 7, when capacity utilization totaled 78.7% based on production of 1.82 million tons. During the same period last year, production totaled 1.86 million tons based on a capacity utilization of 79.4%.

Year-to-date capacity utilization through Dec. 7 totaled 80.1%, with 90.74 million tons produced. This represents a 1.9% increase compared to last year’s production of 79.06 million tons during the same period (based on a capacity utilization of 78.2%).

Chinese HRC, CRC steel prices show slight gains

Chinese HRC and CRC prices increased during November — by roughly 6% and 4.5%, respectively — bringing prices back to September levels.

Source: MetalMiner data from MetalMiner IndX(™)

HDG and plate prices held flat, however, keeping prices among the four key forms sideways overall.

Nippon Steel to potentially shutter two blast furnaces; Japanese fiscal stimulus package likely to boost demand

In order to better align fixed production costs with domestic demand, Nippon Steel may close two of 15 blast furnaces in operation across the country by March 2024.

Demand for steel slowed for the Japanese producer due to decreasing domestic population, higher export barriers, and trade issues, according to management team discussions with the press.

Typically, the company exports more than 40% of output. Recently, however, export levels suffered due to the desire of other Asian countries to boost domestic steel production, in addition to increased Chinese exports.

The Japanese government recently announced a $122 billion fiscal stimulus package that will likely boost demand levels due to infrastructure development targeting natural disaster mitigation.

Major merger on the horizon for Cleveland-Cliffs, AK Steel

Cleveland-Cliffs Inc. recently announced its intent to purchase AK Steel Holding Corp. for $1.1 billion.

As detailed in a recent MetalMiner article, the deal provides Cleveland-Cliffs with built-in demand for pellet production, while also entering Cleveland-Cliffs into steel production.

Cleveland-Cliffs now derives around 23% of annual income from AK Steel, the company’s largest customer with the exception of ArcelorMittal SA.

The agreement still faces antitrust vetting. Completion of the deal is expected during H1 2020.

U.S. economic indicators remain positive overall

While growth remains somewhat constrained as 2019 comes to a close, the U.S. economy continues to maintain momentum overall.

According to the most recent Beige Book report released by the Board of Governors of the Federal Reserve System, based on data collected through Nov. 18, economic activity in aggregate expanded modestly from October through mid-November, at a similar pace as the previous reporting period.

Most districts reported increases in auto sales. Also, an increasing number showed improved manufacturing activity, but the majority still reported flat activity.

Residential home sales were flat to higher across districts, while residential construction improvements expanded to more areas.

Nonresidential construction continued to increase modestly, while the energy sector showed modest deterioration in activity.

The Federal Reserve Bank of Atlanta’s GDPNow model estimate of GDP growth jumped by 0.5% to 2.0% on Dec. 6 based on recent data inputs.

GDPNow provides a running forecast of the official estimate in advance to its release and is based only on mathematical results of the model.

What this means for industrial buyers

Improved demand appeared to push up prices this month.

So far, however, price increases look fairly mild, with some recent momentum attributed to pushed-forward Q1 2020 demand.

It’s still too soon to tell if price increases will continue from here.

Buying organizations interested in tracking industrial metals prices with ease will want to request a demo of the all-new MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term steel price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

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Actual raw steel prices and trends

LME billet three-month prices increased the most among index values this month, rising by 9.3% month over month to $262/st as of Dec. 1.

The U.S. Midwest HRC futures spot price dropped 0.4% to $493/st, while the Midwest HRC futures three-month price increased by 7.5% to $590/st.

U.S. shredded scrap prices increased 4.4% to $235/st.

All Chinese prices in the index increased. Coking coal increased the most, by 6.4% to $264/mt, while HRC increased by 6.3% by $530/mt. Steel billet increased by 2.9% to $510/mt, while slab rose by 2% to $519/mt.

Iron ore prices remained essentially flat, with a mild 0.1% increase to around $64 per dry metric ton.

Korean scrap prices registered a third double-digit monthly decrease, down by 11.5% to $72/mt. Korean pig iron prices also dropped this month, falling 1% to $364/mt.