steel price

The Raw Steels Monthly Metals Index (MMI) dropped more significantly compared to last month’s one-point decline, this month falling by four points to 70. Global prices looked weak overall; however, U.S. futures spot prices increased, along with U.S. shredded scrap prices.

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U.S. steel price increases lost momentum in August, as prices for HRC, CRC, HDG and plate all moved more or less sideways.

Source: MetalMiner data from MetalMiner IndX(™)

U.S. capacity utilization fell below 80% recently. Capacity utilization dropped to 78.8% during the week ending Sept. 7, with 1.835 million net tons produced, compared with 1.866 million net tons the week prior. This represented a 1.7% decline compared with the same period last year, according to the American Iron and Steel Institute (AISI).

U.S. shredded scrap prices increased by 14.4% to $294/st, reflecting the shift of production methods toward electric arc furnace (EAF).

Chinese HRC, CRC Prices Move Sideways Once Again

Chinese HRC and CRC prices continued to move sideways overall in August. CRC prices once again increased, while HRC prices moved lower, although neither moved with much power. The spread between HRC and CRC prices increased once again this month after hitting a two-year low a couple of months ago.

Global Production Increases Mildly; Production Drop in China

According to the most recent data available from the World Steel Association (WSA), global production of steel totaled 156.7 million tons in July, up by 1.7% compared to last year. U.S. production totaled 7.5 million tons during July 2019, up by 1.8% compared to July 2018.

China produced 85.2 million tons of steel in July, up by 5% compared to July 2018. However, production dropped compared with June, marking the second straight month of falling production. China’s output in May — the peak for 2019 thus far — totaled 89.1 million tons.

What This Means for Industrial Buyers

While a few prices in the index increased this month, the majority of prices dropped, pulling the index down. However, key steel prices moved sideways.

Industrial buying organizations will still want to watch the market in September for typical seasonal price increases.

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

Overall, global steel prices weakened during the month of August. However, the U.S. Midwest spot price increased by 8% to $586/st. U.S. shredded scrap prices increased by 14.4% to $294/st.

Chinese prices in the index fell across the board this month. Coking coal prices fell the most — by 14% — to $238/st. Chinese iron ore prices dropped by 4%.

Chinese steel billet decreased by 9.5% to $434/st. Chinese steel slab prices dropped by 8.7% to $462/st, while Chinese HRC prices dropped by 8% to $463/st.

Korean scrap prices increased this month, somewhat reversing last month’s 8.3% decrease, up by 3.9% to $127/st. Korean pig iron fell again this month, dropping by 2.2% to $325/st.

LME billet three-month prices dropped by 9.8% $241/st.

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This morning in metals news, Bank Of America cut its steel price forecast, copper prices dropped and gold lost some of its safe haven luster.

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Gloomy Steel Forecast

Bank of America has cut its steel price forecast and is less than optimistic about steel stocks going forward, Yahoo Finance reported.

According to the report, Bank of America analyst Timna Tanners cut her U.S. HRC price target for the second half of the year from $628 per short ton to $572 per short ton.

Tanners also cut 2019 EPS cuts for U.S. Steel, Nucor, Reliance Steel and Aluminum, Steel Dynamics and Commercial Metals Company, according to Yahoo.

Copper Price Drops

Markets continue to fluctuate on a daily basis based on any sliver of news emerging from the ongoing U.S.-China trade war.

On Friday, despite China’s intention to increase bank lending, LME copper was bid down 0.6% to $5,812 per ton, according to Reuters, after reaching a two-year low earlier this week.

Not so Golden

The gold price posted its largest daily dollar loss in three years, MarketWatch reported, on optimism regarding trade and jobs data impacting its safe haven appeal.

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According to the report, gold on the COMEX for December delivery slipped 2.2% to a two-week low of $1,525.50 per ounce.

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India’s growth rate has slowed, which in turn means sluggishness in the manufacturing sector.

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All of the above means lower consumption of steel.

Riding on these developments comes the news that domestic steel producers are sitting on a “larger than usual” steel inventory.

A report in the Business Standard quoted Sushim Banerjee, director general at the Institute of Steel Development Growth, as saying steel inventories are at “alarming” levels of 35 days rather than the more typical 21 days.

The total steel inventory of all primary producers in India is at 2 million tons, up from the more typical level of 1 million tons, according to the Business Standard. Because of such high inventory, domestic prices have fallen by about 20% since April.

Ratings agency Fitch Solutions has revised its 2019 global steel price forecast downward to an average of U.S. $600 per ton from $650, citing weak investor sentiment, the ongoing U.S.-China trade war and uncertainty surrounding the U.K.’s Brexit effort, the Business Standard reported.

Nikunj Turakhia, director at the Steel Users Federation of India, was quoted as saying domestic steel prices were close to the bottom and hoped they would start rising soon.

There is more bad news for Indian steel companies.

Ratings agency India Ratings and Research has revised its outlook on the steel sector to “stable-to-negative” from “stable” for the remainder of this fiscal year. One of the reasons for the downgrade is sluggish demand. The rating agency has also revised downwards its fiscal year 2020 steel demand growth expectation to around 4% from the previous forecast of 7%.

All of this comes as global crude steel production rose by 1.7% in July, with Indian steel production increasing by the same percentage.

Tata Steel has announced a closure of some of its operations in the U.K., which could lead to a loss of about 400 jobs.

It has not been a good year for many steel companies in India; for example, Tata Steel Ltd’s first-quarter profit slumped to its lowest level in more than two years.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

India’s S&P BSE Metal Index has fallen by about 30% so far this year due to the slowdown in the economy and infrastructure.

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This morning in metals news, Chinese iron ore futures fell to their lowest level in 10 weeks, JP Morgan weighed in on the impact of tariffs on U.S. consumers and Tokyo Steel has decided to hold its prices steady for September.

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Iron Ore Slide Continues

Chinese iron ore futures fell to a 10-week low, Reuters reported.

Iron ore prices surged to five-year highs earlier this summer, but have plunged since then.

According to Reuters, the most-traded iron ore contract on the Dalian Commodity Exchange closed down 4.3% to 589.50 yuan per ton.

Tariff Impact

According to an analysis by investment bank JP Morgan, the Trump administration’s tariffs to date have had an average per-household impact of $600, CNN reported.

However, if the Trump administration goes through with the recently announced 10% on $300 billion in Chinese goods, that impact will rise to $1,000 per household.

Tokyo Steel Stands Pat on Prices

Tokyo Steel announced it will hold prices steady for September, Reuters reported.

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According to the report, the announcement marks the second straight month of price freezes from Tokyo Steel.

The Raw Steels Monthly Metals Index (MMI) fell one point this month for an August reading of 74.

Small price increases for some metals did not outweigh a few steeper price drops, bringing the index down for the month.

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U.S. steel prices seemed to find a bottom recently (at least for HRC, CRC and HDG). Plate prices stopped dropping and moved sideways with the most recent price changes.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese HRC and CRC Prices Move Sideways

Source: MetalMiner data from MetalMiner IndX(™)

Chinese HRC and CRC prices continued to move sideways this month. However, CRC prices showed more strength, with another modest increase in early August, while HRC prices declined slightly as August started, reversing the recent mild uptick that occurred in July.

U.S. HRC and Chinese HRC Prices Start to Diverge Again

Source: MetalMiner data from MetalMiner IndX(™)

Since peaking in mid-2018, the spread between U.S. and Chinese HRC prices began to narrow. The spread hit its narrowest point in about 1.5 years last month when it dropped to a difference of around $37/st — the third-lowest value since January 2014.

The recent increase in U.S. prices increased the spread once more, but it remains low at just $70/st. This does not yet reflect the recent devaluation of China’s currency back to the range of CNY 7-to-1, which should further increase the steel price spread (unless Chinese prices start to rise to a greater extent than U.S. prices).

Source: MetalMiner data from MetalMiner IndX(™)

Chinese and U.S. CRC prices moved more similarly, overall, with both prices increasing again of late.

Similar to HRC, the spread between prices closed quite a bit, but a larger spread remains for CRC. The spread between the two CRC prices currently measures $158/st, up slightly from around $149/st last month — the lowest values seen since late 2017.

What This Means for Industrial Buyers

The global steel prices tracked by the index once again showed mixed performance this month.

The U.S. Midwest HRC futures spot price increased slightly, turning around after last month’s decline. The U.S. Midwest HRC futures 3-month price increased once again this month. China saw mixed price signals, with some prices up and others down.

With prices giving sustained mixed signals, industrial buying organizations seeking more pricing guidance should try a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about longer-term steel price trends can do so with the Annual Outlook.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Raw Steel Prices and Trends

Prices in the index showed mixed performance this month.

Korean prices showed a clear drop. Korean standard scrap steel prices dropped by 8.3% to $122/st and pig iron prices fell by 2.6% to $332/st.

Chinese price movements remain mixed. Chinese steel slab prices increased the most (by 3.2% to $489/st). Chinese HRC prices increased by 1.3% to $479/st.

Chinese steel billet decreased by 2.7% to $470/st and coking coal prices dropped by 1.1% to $278/mt. Chinese iron ore prices edged down slightly, by less than 0.5%.

U.S. shredded scrap prices fell by 6.2% to $257/st, while U.S. Midwest futures 3-month price increased by 3.2% to $619/st.

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LME billet 3-month prices dropped 2.7% $268/mt.

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Where are steel prices going from here? What about lead times? How are tariffs impacting the market?

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Those in the steel sector will have a chance to learn about all of the trends impacting the steel industry during the upcoming SMU Steel Summit, scheduled for Aug. 26-28 at the Georgia International Convention Center in Atlanta.

The 2018 iteration of the summit attracted 912 attendees from 410 companies, 95% of whom were “actively associated with the flat rolled steel industry in North America and around the world,” according to the event’s website.

In addition to analysis of steel prices trends, the summit also offers attendees the opportunity to network and gain insights into trends in other sectors, including banking, international trade and regulation, and the automotive, construction and energy markets (among other subjects).

Ahead of the event, we chatted with CRU’s principal analyst for steel, Josh Spoores, who is one of 28 scheduled speakers during the multiday summit.

Of course, one of the biggest developments in steel over the last year or so has been the U.S. Section 232 tariff on imported steel, which went into effect March 23, 2018.

Canada, Mexico and the E.U. initially won temporary exemptions from the tariffs, but those eventually were allowed to expire June 1, 2018. Recently, however, the U.S. rescinded the tariff with respect to Canada and Mexico amid ongoing attempts to pass the United States-Mexico-Canada Agreement (USMCA), the free trade agreement meant as the successor to the North American Free Trade Agreement (NAFTA).

Spoores said the Section 232 tariffs have been successful at boosting U.S. steel production (according to the American Iron and Steel Institute, the domestic steel sector operated at a capacity utilization rate of 81.1% for the year through July 13, compared with 77.0% for the same period in 2018).

But are the tariffs here to stay?

“It’s a hard thing to forecast how these come out,” he said. “Our best reference to these is the Section 201 tariff in 2002, and those lasted nearly two years. Our expectation is that the 232 is not a permanent fix. It’s going to weaken at some point, but there’s a very good possibility that remnants of it could last for a very long time.”

U.S. steel prices have been trending downward since last summer; in that time, the sector has also seen a decline in lead times (as noted in MetalMiner’s most recent Monthly Metal Buying Outlook).

“They’ve gotten low,” Spoores said. “Some producers expanded. I think volatility is going to remain here — I think we’re looking at some mini cycles in terms of steel. We saw some of those mini cycles coming out of the global financial crisis.”

In terms of steel price cyclicality, he said the elements for a strong year were there even before the imposition of the Section 232 tariffs in March.

“We did see that 2018 was going to be a very strong year anyway before the tariffs,” Spoores said. “Tariffs came out and they really supercharged that. The end result was really a longer-term price cycle that moved up.

“We’ve seen the price cycle move down now for about a year. I think where we are right now is maybe back toward that mini cycle where inventories haven’t fallen too far. Imports are down, U.S. prices are down — they’re lower than China right now, domestically.”

However, demand is not high enough to spur a new, longer-term cycle, Spoores added.

“Without new demand coming out and rising, I think we’re going to be stuck where lead times are in that mini cycle where they expand a little bit and they start to contract,” he said.

Looking ahead, slowing economic growth around the world and trade uncertainty are casting a shadow on commerce, generally.

The same is certainly the case for steel markets, in both the U.S. and around the world.

“We’re seeing industrial growth in the U.S. fall dramatically,” Spoores said. “In North America it was 4% last year, and this year we’ve dropped our forecast down to just 0.8%. That growth is slowing quite a bit and we’re seeing a lot of that reflected in PMI data. We’re pretty much neutral on some key components right now in the U.S. Globally, the PMI data for Europe and Asia — it looks pretty bad.

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“I think the biggest near-term view here is just slower economic activity than everybody really anticipated right now.”

For more information about the upcoming SMU Steel Summit, visit the event page. MetalMiner is a supporter of the 2019 summit (MetalMiner Executive Director Lisa Reisman will be in attendance).

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The Raw Steels Monthly Metals Index (MMI) fell slightly this month, following last month’s more significant decline. The index came in at 75 this month, down one point from the previous month.

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U.S. steel prices continued their clear drop this month, with prices dropping for HRC, CRC, HDG and plate.

Source: MetalMiner data from MetalMiner IndX(™)

HRC prices dropped by around 12% over the course of June, the steepest price decline in the Raw Steels basket of metals. HDG dropped by around 7%. CRC and plate prices dropped by 5% and 4%, respectively.

Recently, the American Iron and Steel Institute (AISI) reported that U.S. steel production capacity utilization reached 79.4% during the week ending on July 6, up from 77.4% one year ago. Capacity utilization decreased from the prior week by 0.2%.

Production totaled 1.85 million tons for the week, with year-to-date production at 50.46 million net tons based on a capacity utilization of 81.2%. So far this year, production numbers increased by 5.3% compared to the same period last year.

According to the most recently published U.S Census Bureau numbers, May steel imports dropped to a value of $1.9 billion, compared with $2.5 billion in April. In May, imports totaled 1.9 million metric tons compared to 3 million metric tons in April. Imports of blooms, billets and slabs dropped during May, while imports of reinforcing bars, sheets and strip, and heavy structural shapes increased.

Through the first four months of the year, imports totaled 10.4 million metric tons, down from 11.3 million metric tons during the same period of 2018. While imports of hot-rolled and cold-rolled sheets fell, imports of blooms, billets and slabs increased compared with the same period last year.

The U.S. Department of Commerce ruled July 8 in favor of duties on structural steel imports from China and Mexico based on the argument that the imports benefited from state subsidies. Meanwhile, the Department of Commerce made a negative determination with respect to imports of fabricated structural steel from Canada, finding Canadian exporters benefited from countervailable subsidies ranging from 0.12-0.45%.

Chinese HRC, CRC Prices Moving Sideways

Source: MetalMiner data from MetalMiner IndX(™)

Rather than continuing to drop, prices of HRC and CRC increased slightly this month; however, they did not fully recover from the previous month’s price drops. HDG and plate prices, meanwhile, continued to drop into early July.

The Chinese government’s stimulus measures, combined with additional capacity closures, appear to be supporting some prices at this time.

Reuters recently reported Hebei, China’s top steelmaking province, moved up its December 2019 capacity cut targets by two months to the end of this October, according to provincial authorities.

Coal and coke will also see planned reductions of 10 million tons and 3 million tons, respectively. as authorities continue to work on improving air quality. Last year, around 12 million tons of steel capacity, along with some coal and coke capacity, were eliminated in the region and some cities closed steel production.

Regardless, Chinese steel output in aggregate continues to rise in 2019, as demonstrated by the production volume statistics published by TradingEconomics.com. Figures indicate steel production hit a new monthly high in May of around 89.1 million tons, up from the then-monthly high in April of 85 million tons.

With iron ore prices still high and representing around 30% of the price of steel, this may also provide some support to Chinese steel prices.

What This Means for Industrial Buyers

The global steel prices tracked by the index showed mixed performance this month, with U.S. prices showing the greatest weakness.

The U.S. Midwest HRC futures spot price dropped significantly, while the U.S. Midwest HRC futures 3-month price increased, showing some bullishness despite currently falling prices.

With prices giving mixed signals, industrial buying organizations seeking more pricing guidance should request a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will also want to read more about longer-term steel price trends can do so with MetalMiner’s Annual Outlook.

Actual Raw Steel Prices and Trends

Once again, U.S. prices registered the largest price decrease this month.

The U.S. Midwest HRC futures spot price dropped by 7.6% on a month-over-month basis to $536/st, while the U.S. shredded scrap price dropped by 7.1% to $274/st.

In contrast, the U.S. Midwest HRC futures 3-month price increased by 2.4% to $600/st.

Korean standard scrap steel prices increased by 5% to $133/st. Korean pig iron prices increased by 1.9% to $341/st.

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China’s HRC price fell by 3.5% to $497/st and steel slab dropped by 1.5% to 490/st, while other Chinese prices in the index increased. Steel billet increased by 2% to $493/mt, while the remaining Chinese prices increased in the range of 0.5% to 1%.

Chinese steel mills are caught between the proverbial rock and a hard place.

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Iron ore prices surged to their highest level in five years on the back of mine closures in Brazil and robust demand, the ABC reported.

Vale’s Feijao mine disaster, which killed around 250 people, has resulted in the loss of around 6% of seaborne supply since late January, the ABC reports.

The market is feeling the squeeze.

Iron ore inventories at Chinese ports have dwindled away to the lowest level in more than two years. The current price is approaching U.S. $120/metric ton, still well short of the record U.S. $191/ton in early 2011 or the $160/ton reached in the last big rally seven years ago. However, the current price is still rising inexorably and resulting in mill margins becoming so pressured that some producers have slipped into the red.

Chinese steel futures are reacting to the tight market with rebar prices hitting a near eight-year high and hot-rolled coil climbing to an all-time peak, Reuters reported. Steel demand from downstream sectors in China is reported to be very strong, yet finished steel prices are not rising fast enough to spare steel mills from becoming squeezed in the tight raw material supply market.

Needless to say, with delivered cost prices from Australian iron ore mines into China at around $30 per ton, Rio Tinto, BHP and their smaller brethren are making hefty margins. But in recognition of the probability that Brazil’s mine closure issues are more short term than long term, Australian miners are not investing in major new projects. Rather, they are spending cash paying down debt, making cost-saving investments and distributing surpluses to shareholders.

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Elevated iron ore prices are not expected to persist into next year. The consensus forecast is for prices to drop back into the $80-$90 range by next year, ABC reports, so Chinese steel mills’ pain is likely to be relatively short-lived.

Following consolidation in the industry and the closure of many illegal or unlicensed producers, the remaining behemoths will be able to ride out the few months of negative or poor margins in the expectation falling raw material costs and/or rising finished steel prices will come to their rescue later this year.

(Editor’s note: This is the second of a two-part series. Read Part 1 here.)

The International Monetary Fund (IMF) recently lowered its 2019 growth forecast for China from 6.3% to 6.2%.

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China’s current economic slowdown shows in the FXI, a large-cap market index. After showing unexpected strength early in the year and rising through the first part of April, performance turned around and the index began to fall once more.

After falling back to nearly start-of-year values, gains managed to hold at around 40 points. This seems to coincide roughly with press reports that stimulus measures from early in the year had begun to wane.

Crude Steel Production Remains High as Prices Weaken

According to the monthly Caixin report numbers, steel production totaled 85 million metric tons, apparently the highest monthly production total on record and about 5 million metric tons higher than the previous month.

Demand from the construction sector remains robust, but Wu Jingjing, a deputy director for the China Iron and Steel Association (CISA), warned demand growth from the sector will wane during the second half of the year. CISA maintains its 2019 forecast for 1-2% demand growth. However, demand from the automobile, household appliances and energy sectors looks weaker.

CISA reported a 1% steel price drop in May and an iron ore price increase of 7%. Higher iron ore prices hurt operational profitability, with CISA’s members reporting a 19.38% year-on-year decrease in profits for the January to April period (despite an 11% increase in sales revenue).

Consolidation of the Steel Industry is Underway

According to Reuters, the Chinese government is seeking to consolidate its steel industry to some extent by 2020 in order to boost the industry’s efficiency.

If government plans to constrain production through consolidation succeed, this would support higher prices for the industry. U.S. prices would also benefit, given that China’s prices tend to lead U.S. prices by about one month.

China Baowu Steel Group, the second-largest steel producer worldwide in 2018, announced its intent to acquire a majority stake in Magang Group Holding Co Ltd, of which Maanshan Iron & Steel Co Ltd, the 16th-largest producer, is a listed entity.

Baowu Steel Group produced 67.43 million metric tons in 2018, according to the World Steel Association, while Maanshan produced 19.71 million tons in 2018.

Raw Material Inputs Continue to Face Supply Issues

Iron ore prices remain high as supplies remain tight. According to customs data, imports recovered to some extent during May, rising by 37% to 83.75 million tons. Overall, shipments dropped by 11% compared with May 2018. Imports for the first five months of the year dropped by 5.2% compared with the same period in 2018.

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According to the Xinhua News Agency, as reported by Reuters, all coke plants that do not meet special emissions standards slated to go into effect on Oct. 1 in Shanxi — China’s top coke-producing region — will be closed.

Additionally, the government is seeking to reduce capacity for 2019 by 10 million tons. The region failed to comply with similar capacity reduction goals in the recent past.

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(Editor’s note: This is the first of a two-part series examining Chinese flat-rolled steel prices. The first part examines historical steel price trends. The second part, which will be published Tuesday, will cover the economic outlook for China.)

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Chinese steel prices started to weaken in late May and continued to decline into the second week of June (after generally increasing this year).

A seasonal steel price change typically happens at the start of the summer due to the change in weather, which impacts construction and, therefore, steel demand.

Source: MetalMiner data from MetalMiner IndX(™)

Looking at the longer-term pattern since 2016, prices have dipped around the June time frame and tend to correct or show a clear change of the longer-term direction in July.

Theoretically, demand starts to pick up again as fall seasonal restocking picks up, supporting prices. However, in some years, demand may fail to pick, vis-a-vis available supply (as in 2015, when prices kept falling).

In 2018, the seasonal pickup did not last long. Prices turned down again by October, although they stayed relatively flat overall.

Source: MetalMiner data from MetalMiner IndX(™)

From a longer-term perspective, prices continued to increase overall when considering the period since mid-2015, as shown in the chart above. Considering January 2017 forward only, prices have moved sideways overall.

HRC, CRC and plate prices mildly increased in the first quarter, but the rate of increase looked weaker during 2019 than in previous years. More recently, all three prices have grown weaker; CRC for example, only increased into March and grew weaker by April.

Chinese HRC prices dropped slightly in early June after generally rising since the start of the year and into late May. Government stimulus measures have not provided price support lately, although additional support measures, especially continued fiscal stimulus measures and tax cuts aimed at providing support to the economy during the second half of 2019 and into 2020, could provide support.

CRC prices dropped again between May and early June, by 3%, to CNY 4,111/mt, down by around 5% from the short-term April high of CNY 4,331/mt. With CRC prices dropping more steeply of late, the China HRC-CRC spread narrowed to CNY 191/mt.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

As pointed out in MetalMiner’s June Monthly Metal Buying Outlook, CRC prices suffered from a supply glut due to blast furnace restrictions that led producers to invest in downstream production, like CRC and HDG, instead of HRC.