steel price

London Metal Exchange

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Steel is the world’s second-largest commodity after crude oil. It is 15 times the size of all other metals markets combined in terms of metric tons. Furthermore, it is worth twice their value.

Yet, until recently, it was an industry that saw little use for a futures market. That is primarily because major steel participants enjoyed stable long-term prices for the materials they needed.

Price material volatility

Prices for iron ore and coking coal, two of the essential raw materials for steel production, have become far more volatile in recent years. That volatility has sent price shocks rippling through the supply chain. In turn, it has created volatility in finished steel prices that consumers are desperate to contain.

Enter the major futures exchanges. For over 200 years, the London Metal Exchange (LME) has provided the trade – producers, traders and consumers – the opportunity to hedge their risk across a growing range of base metals.

However, only recently have exchanges such as the LME, the U.S.’s CME and the Shanghai Futures Exchange (SHFE) in China introduced products allowing the trade to hedge raw material and finished steel price risk.

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The Raw Steels Monthly Metals Index (MMI) increased by 16.5% this month, as steel prices showed strength in December.

January 2021 Raw Steels MMI chart

U.S. steel events

The American Iron and Steel Institute, the Steel Manufacturers Association, the United Steelworkers union, the Committee on Pipe and Tube Imports and the American Institute of Steel Construction sent a letter to Joe Biden urging him to keep the 25% national security tariffs on steel imports that were imposed in 2018.

The industry groups emphasized that the tariffs are essential “to ensure the viability of the domestic steel industry in the face of this massive and growing excess steel capacity.”

“Removing or weakening of these measures before major steel producing countries eliminate their overcapacity — and the subsidies and other trade-distorting policies that have fueled the steel crisis — will only invite a new surge in imports with devastating effects to domestic steel producers and their workers,” the letter continued.

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China story steel production

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Continuing our look back at the best of 2020, today we’ll take one last review of the top steel posts of the year here on MetalMiner.

As with metals as a whole, steel prices experienced a rocky 2020.

The coronavirus pandemic slammed metals demand overall, including steel demand. The automotive industry idled production at the end of Q1 and into Q2, severely denting demand.

However, eventually automakers restarted lines and demand returned. As the year has progressed, steel prices have continued to rise and show no signs of slowing down in the near term. The U.S. HRC price, for example, is up a whopping 28.61% over the last month.

With that, let’s take a look back at the most-viewed steel stories of the year.

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Best of 2020: top steel posts

  1. Coronavirus likely to impact steel, iron ore demand in 2020

  2. This Morning in Metals: U.S. steel prices rise

  3. India’s steel sector struggled in 2019 — but what does 2020 hold?

  4. Trump expands Section 232 tariffs on steel, aluminum derivatives

  5. China’s steel industry likely to see cutbacks as stocks rise amid coronavirus crisis

  6. Raw Steels MMI: Index increases by 9%

  7. Raw Steels MMI: U.S. steel prices make gains, aided by auto sector

  8. Stainless MMI: Stainless steel surcharges rise for fourth straight month

  9. Chinese construction steel prices dip amid cluster of new coronavirus cases

  10. Raw Steels MMI: U.S. price increases push three-point index gain

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There has been quite a bit of analyst chatter about the likely impact of China’s return to the steel scrap market next year.

In 2019, the authorities essentially banned steel scrap imports. The move came, in part, because many of the grades were classified as waste. However, of late the rumor is China will be moving to reclassify ferrous scrap as a recyclable resource and could lift the import ban (probably in Q1 2021).

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

Steel scrap imports plunge

According to Platts, China has 184 million tons of EAF steelmaking capacity at the end of 2020. Furthermore, the country will likely have 197 million tons by end of 2021.

The totals are up from 175 million ton at the end of 2019, when scrap imports had plunged to just 180,000 tons due to the ban.

Domestic steel scrap production has been on the rise, generating some 240 million tons in 2019. As such, the 2014-18 average annual imports figure can be seen as minuscule by comparison.

But while they may be small, they are not insignificant.

Normally, imports rise and fall relative to the premium arbitrage of domestic prices over world prices. Currently, domestic steel scrap prices in China are said to be about $60/mt or Yuan 400/mt over Southeast Asian seaborne scrap prices on like-for-like grades (when freight and taxes are included).

Should imports be relaxed, there is, therefore, the potential to suck in considerable imports.

Platts suggests this would not top the record 13.7 million tons imported in 2009. Some, however, disagree, saying it could reach 20 million tons.

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auto sale

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The Automotive Monthly Metals Index (MMI) gained 9.6% for this month’s index value, as U.S. auto sales continue to show resilience.

December 2020 Automotive MMI chart

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U.S. auto sales

General Motors switched from monthly to quarterly sales reporting in 2018; Ford followed suit in early 2019.

However, despite the industry trending toward quarterly reporting, Ford has apparently had a change of heart.

The automaker last month announced it would return to quarterly reporting. Ford reported November U.S. sales of 149,931 vehicles, down 20.9% year over year.

Ford truck sales fell 20.9%, while SUV and car sales fell 16.4% and 39.1%, respectively.

Among other monthly reporters, Honda reported November sales fell 23.4% year over year. Honda car sales fell 26.9% and truck sales fell 21%.

Hyundai sales fell 9% year over year in November.

“We were able to maintain our industry-beating sales momentum despite quirks in the reporting calendar and added COVID-19 challenges,” said Randy Parker, vice president of national sales at Hyundai Motor America.

U.S. auto sales forecast to nearly match 2019 levels in November

According to the most recent automotive forecast released by J.D. Power and LMC Automotive, new-vehicle retail sales were forecast to drop 0.7% in November when accounting for changes in selling days.

Meanwhile, for total U.S. auto sales, the forecast included a 3.5% decrease when adjusted for selling days.

“November 2020 is a prime example of why accounting for selling day differences is important in measuring comparable sales performance,” said Thomas King, president of the data and analytics division at J.D. Power. “After two consecutive months of year-over-year retail sales gains, a quirk in the November sales calendar will result in new-vehicle retail sales appearing to fall 12%. This year, November has three fewer selling days and one less selling weekend compared with 2019. When these calendar quirks are accounted for, new-vehicle retail sales are expected to almost match 2019 levels.”

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hot rolled steel

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This morning in metals news: the U.S.’s steel capacity utilization rate reached 71.4% for the week ended Nov. 14; a survey by INVERTO took a look at procurement trends during the COVID-19 pandemic; and steel prices continue to rise.

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Capacity utilization rises to 71.4%

The U.S. steel sector’s capacity utilization rate for the week ended Nov. 14 reached 71.4%, the American Iron and Steel Institute (AISI) reported.

The rate marked an increase from 71.1% the previous week. However, the rate fell from 78.8% during the same time frame in 2019.

Steel production during the week ended Nov. 14, 2020, totaled 1.58 million net tons. The production total marked a 0.4% increase from the previous week but a 13.3% year-over-year decline.

INVERTO releases Raw Materials Study 2020

A survey conducted as part of INVERTO’s Raw Materials Study 2020 delved into the impact of the COVID-19 pandemic on procurement and ways buyers have tried to adapt to the challenges of 2020.

Among its key findings, INVERTO noted of the survey respondents that “supply security is underestimated,” with few expressing concern about raw materials supply in the future.

Furthermore, INVERTO concluded few companies had taken “structured, profound and long-term countermeasures” in response to the pandemic.

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We wrote last month how China’s rapid recovery from the COVID-19 pandemic resulted in the country importing semi-finished products for which it previously had been self-reliant or even a net exporter for the last decade.

Some steel products and primary aluminum swung into becoming significant net inflows for the economy during the summer months.

But as we cautioned at the time, this was only expected to be a temporary phenomenon.

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report!

China’s steel flows recalibrate

Sure enough, although volumes are still down on this time last year, exports have picked up and imports have fallen.

In a recent post, Argus Media reported China’s steel exports in October rose by 5.2% from September to 4.04 million tons. Chinese mills shifted supplies to overseas markets, enabled — or forced, depending on your point of view — by falling domestic prices.

Summertime exports rose as domestic prices fell

Falling domestic prices in the summer aided Chinese steel mills’ ability to export so aggressively.

Domestic inventory levels rose and domestic crude steel production hit record levels of 3.09 million tons a day in September, in large part to meet domestic demand. Weakness in domestic steel prices suggests overoptimism by the steel mills, inevitably resulting in excess production leaking into export markets looking for a home.

Domestic Chinese steel prices have recovered since the summer as global steel prices have risen and imports have fallen.

As the global recovery has lifted demand and prices, mills in India and elsewhere have not felt the need to distress sell metal into China. In addition, the arbitrage window has narrowed.

Imports have therefore appeared less attractive to Chinese buyers and exports more attractive to mills. That is a trend we expect to continue through Q4.

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The Raw Steels Monthly Metals Index (MMI) increased by 5.4% this month, as U.S. steel prices continued to rise last month.

November 2020 Raw Steels MMI chart

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report!

U.S. and Chinese prices relation

U.S. steel prices continued to increase in October for the third consecutive month.

HRC, CRC, HDG and plate prices increased by 15.4%, 10.0%, 9.0% and 5.3%, respectively. As demand recovers, so have prices.

Wire rod, however, was the only form of steel that did not increase in price this month, as it instead remained flat.

In contrast, Chinese HRC, CRC and plate prices increased around 2% in October. Meanwhile, HDG prices remained flat throughout the month. For the second month,

U.S. prices surpassed Chinese HRC, CRC and HDG prices. No price arbitrage existed for Chinese buyers, as local prices were lower than imported prices. Chinese prices had a four-month uptrend before prices flattened. On the other hand, U.S. prices started their uptrend approximately 2.5 months ago.

For the past two years, Chinese prices have led U.S. prices. Will that relationship mean U.S. prices will flatten within the next month and half?

Domestic demand increases, supports U.S. steel prices

Steel demand in the U.S. seems to be getting stronger.

As we have reported for a few months now, U.S. automotive production is on the rise.

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mergers and acquisitions

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This morning in metals news: Nucor Corporation has reached an agreement to acquire the Precoat Metals Corporation’s paint line facility in Armorel, Arkansas; Constellium recently released its Q3 financial results; and the U.S. HRC price continues to rise.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Nucor to buy Arkansas paint line facility

Nucor plans to acquire the Precoat Metals Corporation paint line facility in Armorel, Arkansas, the steelmaker announced recently.

“The paint line facility, located near the Nucor Steel Arkansas sheet mill campus, has a capacity of approximately 250,000 tons per year,” Nucor said in a release. “Nucor considered building a greenfield paint line before deciding to acquire the Precoat Metals facility.”

Constellium reports Q3 financial results

Aluminum product manufacturer Constellium reported Q3 net income of €20 million (U.S. $23.7 million) compared to net income of €1 million ($1.2 million) in Q3 2019.

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Continuing the theme of the last few months, the U.S. steel sector continued to make gains in capacity utilization last week.

We know there are many popular steel contracting indices. But you shouldn’t use them all the time — sometimes they can favor the seller over the buyer. See why! 

Steel capacity utilization rises to 69.7%

Per the American Iron and Steel Institute, U.S. steel mills recorded a capacity utilization rate of 69.7% during the week ending Oct. 24.

Raw steel production during the week totaled 1.54 million net tons. Meanwhile, production during the week ending Oct. 24, 2019, totaled 1.81 million net tons, at a capacity utilization rate of 78.0%.

On a year-over-year basis, last week’s output marked a 14.6% decline.

Meanwhile, production for the week ending Oct. 24, 2020, ticked up 0.5% from the previous week.  Production during the week ending Oct. 17, 2020, totaled 1.54 million net tons at a capacity utilization rate of 69.4%.

YTD output down 19.3%

In the year to date through Oct. 24, U.S. mills produced 64 million net tons of steel, down 19.3% year over year.

Output during the same period in 2019 totaled 79.4 million net tons at a capacity utilization rate of 80.1%.

Regional output

Broken down by region, output during the week ending Oct. 24, 2020, totaled:

  • Northeast: 135,000 net tons
  • Great Lakes: 563,000 net tons
  • Midwest: 171,000 net tons
  • Southern: 600,000 net tons
  • Western: 73,000 net tons

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