steel price
scrap steel

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

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

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

New EAF capacity coming onstream

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

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

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

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

Differing perspectives on nonferrous vs. steel scrap

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

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

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

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

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

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

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

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

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

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Output drops 2.1%

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

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

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

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

Production by region

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

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

Price movements

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

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

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

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

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

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

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

copper smelter

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

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SHFE copper on the rise again

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

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

Swedish JV eyes fossil-fuel-free steel production

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

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

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

Mexico to institute steel export pre-approval process

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

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

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

Does your company have a steel buying strategy based on current steel price trends?

China and India flags

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

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China ramps up Indian steel purchases

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

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

China’s steel sector against the world

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

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

U.S. trade deficit in July

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

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

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

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steel imports

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

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

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Rises in imports of rebar, blooms, billets and slabs

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

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

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

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

Year-to-date imports remain down

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

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

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

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

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

Falling OCG imports

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

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

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

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

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

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

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

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

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

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

Do you know when you should use a CRU index or AMM HRC for your steel buy? Hint: it’s not very often.

China’s production continues to soar

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

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

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

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

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

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

U.S. steel sector ramps up

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

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

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

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

metalworking

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

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

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

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

Week in Review, Aug. 17-21

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aluminum price landing page

The MetalMiner metals price landing pages (aluminum, carbon steel and stainless steel) now feature LME three-month prices set against MetalMiner’s forecast track record, in addition to “should-cost” prices.

If you’ve visited MetalMiner recently, you might have noticed some changes to our aluminum, carbon steel and stainless steel price landing pages.

The pages can be found from the homepage’s top menu under “Metal Prices.”

As of this month, visitors to these pages can now find a modified, interactive price chart modeling the LME three-month price against the MetalMiner Monthly Outlook forecast track record and including MetalMiner buy signals.

“The main idea here is to showcase savings we can make for our customers if they use our Monthly Outlook,” said Marcos Briones Alvarez, MetalMiner’s procurement forecasting data analyst.

Particularly in a time of considerable volatility, it’s important to stay abreast of what’s going on in metals markets, from capacity developments to pertinent trade news to price drivers.

Metals buying organization can generate savings year-round by subscribing to the MetalMiner Monthly Metal Outlook

Aluminum

In addition, on a weekly basis the pages will feature updated “should-cost” metals prices by grade, width, gauge, etc.

In short, what “should” something — 5052 aluminum sheet, for example — cost?

“Many competitors publish the LME three-month price along with the MW premium,” MetalMiner CEO and Executive Editor Lisa Reisman notes. “Few, if any, publish the conversion adder based upon grade, gauge, width etc. The MetalMiner aluminum should-cost model provides a level of granularity not previously available in the marketplace. In addition, the aluminum model can be used by global market participants vs. only North American companies.”

Carbon steel

Similarly, the new-look carbon steel page also differentiates itself from other offerings.

“All of the published price mechanisms currently available in the market involve the ‘base’ price (e.g., the HRC or the CRC number),” Reisman added. “However, no price index exists to see the total price computed with the base metal, plus all of the adders and extras at the grade level.”

The should-cost metal offers buyers additional granularity in the form of pricing by mill. In short, industrial buying organizations can arm themselves with the necessary knowledge to get the best possible deal (a topic we cover in our dedicated best practice library).

“Moreover, the MetalMiner carbon steel should-cost model allows the buying organization to quickly see which mill charges what price for each adder and extra,” Reisman continued. “So, in addition to providing a total price, the capability allows the buying organization to make a sourcing award decision by mill.”

Stainless steel

Last but not least, the revamped stainless steel page also offers something no one else does.

“There is currently no North American stainless steel price index or mechanism for any buying organization to either: a) negotiate with suppliers or b) establish as a contracting mechanism,” Reisman added.

So what, exactly, makes the MetalMiner stainless steel should-cost model so unique?

“The stainless steel should-cost model provides the buying organization with visibility into all of the elements comprising total cost at the grade level (e.g., 304, 201, 439, etc.),” Reisman said.

Those elements can be broken as such: base price+width/gauge adders+finish+CTL (cut to length)+vinyl adders.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today. 

steel

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This morning in metals news: the U.S. steel sector’s capacity utilization gained once again last month; iron ore futures made gains; and Tokyo Steel Manufacturing Co is keeping its prices steady.

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U.S. steel capacity rises to 61.5%

Continuing the recent theme, the U.S. steel sector posted a steel capacity utilization rate of 61.5% for the week ending Aug. 15, the American Iron and Steel Institute (AISI) reported.

The rate marked an increase from the 60.4% posted the previous week.

Production during the week ending Aug. 15 totaled 1.38 million net tons, up 1.7% from the previous week but down 25.2% year over year.

Iron ore futures gain

Iron ore futures rose Tuesday, powered by expectations of continuing strength in Chinese steel demand, Reuters reported.

The most-traded iron ore contract on the Dalian Commodity Exchange closed up 3.5% at 863 yuan ($124.51) per metric ton.

Tokyo Steel keeps prices steady

Meanwhile, Japan’s Tokyo Steel Manufacturing Co won’t raise its prices in September, Reuters reported, citing uncertainty over steel demand.

While Chinese demand has continued to show strength to date, demand elsewhere continues to lag behind. MetalMiner’s Maria Rosa Gobitz covered the steel demand picture in further detail in her Raw Steels MMI report Monday.

With volatile steel markets, knowing which strategy to execute and when can make all the difference between saving and losing money. See how MetalMiner looks at different market scenarios. 

hot rolled steel

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The Raw Steels Monthly Metals Index (MMI) increased 1.5% for this month’s MMI value. 

August 2020 Raw Steels MMI chart

Learn when you should use a steel scrap cap collar contract versus a finished price index (such as CRU).

Chinese demand on the rise

In the past few months, Chinese HRC and CRC prices have increased over 20%. Meanwhile, their U.S. counterparts have followed the opposite trend. This is due to weaker U.S. demand and stronger-than-expected Chinese demand.

China produced a record amount of crude steel in July as the government boosted infrastructure spending. In addition, the manufacturing sector rebounded as the government lifted lockdown restrictions.

China produced 93.36 million tons of crude steel in July, up 1.9% higher from June. The July total marked a 9.1% increase from July 2019, according to the National Bureau of Statistics of China.

Most of China’s steel production comes from integrated mills. As a result, iron ore prices continue to increase as China’s demand remains strong.

China continued to increase its iron ore imports. In the first half of 2020, China imported 546.91 million tons of iron ore, or a 9.6% year-over-year increase.

Typically, the U.S. market lags the Chinese market by a month or two. Market watchers should monitor if the U.S. steel market to see if it follows a similar price trend to China in the following months.

U.S. steel market

Another factor contributing to the slow recovery of U.S. steel prices may come down to  the rapid recovery of mills’ capability utilization rate.

According to the American Iron and Steel Institute (AISI), the U.S. steel sector’s capacity utilization rate rose to 60.4% for the week ending Aug. 8.

While the rate is lower than the same period in 2019, when it reached 79.1%, the rate has increased steadily over the past few weeks despite low steel demand.

Similarly, steel production increased to 1.35 million tons — up from the previous week but still 26.5% below the same period in 2019.

Nonetheless, the rise of capability utilization rate at mills could mean quite the opposite for scrap.

As U.S. steel production and the capability utilization rate continues to increase, so could demand for scrap. Consequently, scrap prices might increase.

Steel in the rest of the world

The European Steel Association (EUROFER) reported steel consumption in the European Union slid by 12% year over year in the first quarter of 2020.

Furthermore, EUROFER anticipated consumption might dip lower in the second quarter due to lockdown measures.

The association expects the construction industry to perform better than other sectors. However, that still means construction output is forecast to decline by 5.3% in 2020. However, EUROFER forecast a 4% increase in 2021.

Meanwhile, Junichi Akagi, general manager of JFE Steel in Japan, said steel demand should pick up throughout the third and fourth quarters. However, Akagi does not expect demand to recover to pre-pandemic levels until March 2021.

The Japan Iron and Steel Federation reported orders of steel from automakers, which represent approximately 20% of steel demand, declined by 58% during the second quarter of 2020.

This makes it clear that these large steel-producing countries do not expect to recover their steel demand until early 2021.

Actual metals prices and trends

The Chinese slab price rose 3.2% month over month to $538.87/mt as of Aug. 1. Meanwhile, the Chinese billet price rose 2.5% to $487.27/mt.

Chinese coking coal increased 9.7% to $289.35/mt.

U.S. three-month HRC fell 1.5% to $518/st. U.S. shredded scrap steel fell 8.1% to $238/st.

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.