steel price

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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 Recently, however, the U.S. rescinded the tariff with respect to Canada and Mexico amid ongoing attempts to pass the United States-Mexico-Canada Agreement (USMCA), the free trade agreement meant as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.

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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.

The Raw Steels Monthly Metals Index (MMI) came in at 76 this month, a 5% drop, after several months of sideways movement and a May reading of 80.

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U.S. steel prices formed a clear downward price trend. A mix of factors led to the weakness: sluggish demand, companies working off inventory and macroeconomic uncertainty.

Source: MetalMiner data from MetalMiner IndX(™)

Even plate prices dropped this month after stubbornly sticking at around $1,000/st for a lengthy stretch after rising longer term. This month the price dropped by nearly 7%, from $962/st at the start of the month to $902/st in early June.

Similarly, the Chinese economy has shown weakness lately in steel-intensive sectors. However, government stimulus measures still generally kept HRC prices supported, with some weakness in the other form of flat-rolled products.

Recently, the China Caixin Manufacturing PMI held flat for the May reading, but the industrial and manufacturing production readings both declined by several points.

Source: MetalMiner data from MetalMiner IndX(™)

Meanwhile, U.S. steel prices dropped more steeply than Chinese prices, which edged down slightly this month. Looking at a price comparison of U.S. and Chinese HRC prices, the price gap continues to close.

Source: MetalMiner data from MetalMiner IndX(™)

The chart above shows the spread between U.S. and Chinese prices dropped to just over $100/st. In December, the price gap held at over $300/st, so U.S. products look more affordable based on a greater price drop, while Chinese prices stayed relatively flat.

What This Means for Industrial Buyers

Plate prices finally dropped this month, joining HRC, CRC and HDG in a downward price trend.

Given the shifting price dynamic, 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 our longer-term steel price trends in our free Annual Outlook.

Actual Raw Steel Prices and Trends

This month U.S. prices registered the largest price drops in the index with the U.S. Midwest HRC futures spot price down 11.3% to $580/st and the 3-month price down 10.4% to $586/st. U.S. shredded scrap prices dropped 8.1% to $295/st.

Korean standard scrap steel prices fell by 6.8% to $127/st. Korean pig iron prices fell by 1.2% to $333/st.

Chinese steel slab prices were down by 5.9% to $489/st and steel billet dropped by 3.2% to $482/st.

Chinese iron ore PB fines for both high- and low-priced 58% Indian iron ore dropped by 2.4%, both at $59 per dry short ton.

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

Chinese coking coal prices increased this month by 1.6% to $278/st, the only price in the index to increase this month.

If you ask 100 procurement professionals whether or not the Section 232 steel and aluminum tariffs have helped or harmed them, 100% will say the tariffs harmed them.

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After fielding hundreds of calls from metal-buying organizations this past year, we here at MetalMiner can definitely say that metal-buying organizations have felt “tariff pain.”

But at the same time — and there is a big but — many companies mitigated much, if not all, of that price risk by deploying effective sourcing strategies.

The recent press attention given to the alleged “harmful effects” of Section 232 tariffs on aluminum and steel on consumers and businesses appears to be ill-informed.

Before we dive into the details, let’s set the record straight on where steel and aluminum prices appear today, where they were when tariffs went into effect and where they were before tariffs.

Let’s start with hot-rolled coil (HRC):

Source: MetalMiner IndX(SM)

Wait a Second, Rewind…

Two points if you said “wow, it looks like steel prices reached similar highs in 2011.”

To be fair, tariffs did lift steel prices in 2018 to 10-year highs, but prices have declined steadily since last July (four months after tariffs went into effect).

Today’s price levels now appear within the same range in which they traded back in 2011-2015. It’s hard to see how the consumer faces a hefty bill for HRC prices due to tariffs now or for any prior extended length of time.

A similar price dynamic applies to cold-rolled coil (CRC), with a little twist:

Source: MetalMiner IndX(SM)

What’s the twist, you might ask?

Read more

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U.S. steel mills have operated at a capacity utilization rate of 81.8% for the year through May 18, according to the American Iron and Steel Institute’s (AISI) weekly steel production report.

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According to the report, adjusted year-to-date production through May 18 reached 37.5 million net tons at a capability utilization rate of 81.8%, which marked a 6.5% increase from the 35.2 million net tons produced during the same period last year. During that period in 2018, the capacity utilization rate reached 76.6%.

In the week ending on May 18, 2019, domestic raw steel production reached 1.9 million net tons at a capacity utilization rate was 81.6%, up 5.1% from 1.8 million net tons produced during the week ending May 18, 2018 (when the capacity utilization rate was 77.1%). 

Production for the week ending May 18, 2019, was down 1.4% from the previous week ending May 11, 2019, according to AISI. Production for the week ending May 11, 2019, reached 1.9 million net tons at a capacity utilization rate of 82.8%.

Production by region for the week ending May 18, 2019, broke down as follows:

  • North East: 197,000 net tons
  • Great Lakes: 738,000 net tons
  • Midwest: 201,000 net tons
  • Southern: 698,000 net tons
  • Western: 66,000 net tons

In policy news, last week President Donald Trump announced the U.S. would remove its Section 232 tariffs with respect to steel and aluminum imports from Canada and Mexico. The tariffs had been in place for the U.S.’s NAFTA partners since June 1, 2018, when initial temporary exemptions for those countries were allowed to expire (the E.U.’s temporary exemption also expired at that point).

The imposition of the Section 232 tariffs saw to a gradual decline in U.S. steel import market share. U.S. imports of steel fell 12% in 2018 compared with 2017, with import market share reaching 23% in 2018.

While much attention is given to China and its steel overcapacity, it is a minor source of steel for the U.S. According to the International Trade Administration, Canada, Mexico and Brazil were the top three sources of steel for the U.S. last year.

Despite the tariffs, Canada was the largest single-country source of steel imports, accounting for 19% of U.S. steel imports last year, followed by Brazil (14%) and Mexico (11%). However, by volume, U.S. imports from Canada fell 1% in 2018 compared with the previous year and increased 9% from Mexico.

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

“On the other hand, given that the 25% tariff on steel effectively deterred imports of that metal to the U.S., MetalMiner does expect to see an impact on steel prices as imports of steel increase,” MetalMiner analysts explained Friday on the heels of the news the tariffs would be remove for Canada and Mexico.

“Canada serves as the largest exporter of flat rolled steel products, as well as long products, with Mexico taking the No. 3 position. For tubular products, Canada and Mexico take the No. 2 and 3 positions. For stainless steel, Mexico serves as the fourth-largest exporter to the U.S. and Canada does not export stainless to the U.S. in a major way.”

Canada accounted for 32% of U.S. imports of flat products and 21% of long products last year, in both cases constituting the largest piece of the pie in each steel product category. In addition, 15% of the U.S.’s pipe and tube imports came from Canada last year — behind only South Korea (16%) — while Mexico accounted for 13%.

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This morning in metals news, the iron ore price continues to rise, China is reportedly in no rush to restart trade talks after the recent exchange of tariffs and Tokyo Steel once again held prices steady.

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Iron Ore Breaks Through $100/Ton Barrier

The iron ore price has moved above $100/ton to its highest level in five years, the Australian Financial Review reported.

The iron ore price has soared this year, in large part aided by operational failures in Brazil, where a dam breach Vale’s Corrego do Feijao mine killed hundreds and took a significant chunk of the global iron ore supply off the market.

No Rush to Talk

Many were hopeful that the U.S. and China were approaching the final stages of a deal to end their ongoing trade war, one that prior to this month had seen the imposition of tariffs on a total of $360 billion between the two countries.

Those hopes fizzled, as the U.S. accused China of reneging on commitments and President Donald Trump opted to increase tariffs on $200 billion in Chinese goods, raising the tariff rate from 10% to 25%.

So, what’s next?

According to the South China Morning Post, China is in no rush to get trade talks going again.

Tokyo Steel Prices Steady

Tokyo Steel has opted to hold its prices steady for the sixth straight month, Reuters reported.

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According to the report, prices are remaining unchanged on account of weaker market conditions overseas and high inventories in Japan.

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In recent weeks, the Chinese yuan (CNY) has weakened against the U.S. dollar (USD). A weaker yuan makes imports cheaper, all other things holding equal.

As we can see in this chart, during the past couple of weeks the yuan weakened back to roughly December levels.

Will this currency change result in surging steel imports due to the increased attractiveness of Chinese steel prices?

Source: MetalMiner analysis of Yahoo.com data

The Price Spread Still Remains Fairly High, Apples to Apples

The chart below shows the spread between U.S. and Chinese CRC prices since January 2018.

Source: MetalMiner data from MetalMiner IndX(™)

Around the time the U.S. tariffs took effect, U.S. prices increased, while Chinese prices started to move lower.

Fast forward to mid-May 2019 and the differential still remains higher than during the pre-tariff period. The differential is down to just over $200/st — from around $400/st, the 2018 peak — as shown by the spread line in purple, which measures the straight arithmetic difference between the two prices.

Why should we look at Chinese prices? It’s certainly not because China serves a major trading partner for steel. Looking at the statistics, in fact, only around 1% of China’s steel exports come to the U.S.

The reason to study Chinese steel prices owes to the fact that China drives global production, with over 50% of global steel produced in China. In pure price trend analysis, we know it remains a key to future pricing for the U.S., as it will be for all country-level analyses.

As such, examining the Chinese CRC price offers value, regardless of whether or not an organization plans to actually import from China.

A Tactical Examination of the CRC Price Differential

In terms of a more hands-on assessment for buyers looking at importing steel from China, a second look at the spread below takes into account the 25% tariff and $90 per ton in estimated import charges (e.g., freight, trader margin, etc.).

Source: MetalMiner data from MetalMiner IndX(™)

The chart above depicts $90 in importing costs added to the Chinese CRC price only, plus the 25% tariff rate, with the extra 25% added on top only after March 23, 2018.

Adding the import tariff decreases the spread, as shown by the purple line. Subsequently, the tariff triggered a drop in the spread.

At the arrows, we see the differential shift after March 23, 2018, when Chinese prices effectively rose to around $900/st. At that point, the spread dropped significantly, as expected, as shown by the sudden drop in the purple line.

While a spread in China’s favor still remained throughout 2018, into 2019 one could say tariffs leveled the relative price difference. Additionally, U.S. steel prices dropped in line with Chinese prices (plus the tariff and import costs).

With the spread essentially flat, tariffs look to essentially “level the playing field,” as prescribed by their use.

What Does This Mean for Industrial Buyers?

With the Chinese currency weakening once more against the U.S. dollar, MetalMiner expects Chinese imports will start to look increasingly attractive to would-be U.S.-based importers.

However, once we account for the tariffs and import costs, the spread between U.S. and Chinese prices looks effectively negligible.

The fact that U.S. prices for CRC dropped very recently also offset some of the would-be increase in the spread following the weakening of the yuan against the dollar.

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Given that Chinese imports only account for a small percentage of U.S. steel imports at this time, and given the flattening of the spread, the Chinese yuan must depreciate more significantly or U.S. prices must begin to rise once more before we can expect to see a major uptick in imports of Chinese CRC steel.