steel price

Steel imports are once again threatening India’s steel sector, spurring major steel companies to ask the government to impose steel import duties.

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In the past few months, representatives of steel companies like Tata Steel and JSW Steel have met steel ministry officers with a request that the Indian government look at the present steel import-export scenario and impose duties.

According to a Reuters report, Indian domestic producers are facing not only the issue of cheap imports from China, Japan and some Southeast Asian countries, they are also been buffeted by low domestic prices.

Now, there are reports coming in that the steel companies are seriously contemplating increasing prices, which seems like a contrarian position since consumers have the option of buying cheap, imported steel. At the start of the present financial year, India had turned into a net steel importer for the first time in two years. By June, imports had increased by as much as 15%.

JSW Steel has already hiked the prices by over $100 per ton; others are thinking of following suit.

The reason? An increase in some raw material prices and growth in international steel prices. Indian companies have explained their proposed hike was to be in sync with rising international prices.

Imports, however, are what are causing Indian steel majors a major headache.

Imports of stainless steel from Indonesia, for example, has grown by nine times, according to the Indian Stainless-Steel Development Association (ISSDA). ISSDA also feels that countries like Indonesia, Malaysia and others are allegedly abusing the Association of Southeast Asian Nations (ASEAN) free trade agreement.

The steel ministry is sympathetic to the demands of local producers, and may be contemplating some measures to curb the situation.

But it’s not clear exactly what the government plans to do.

Some reports said the new measures may be more in the nature of non-tariff measures. It’s a case of once bitten, twice shy for India on this matter. In 2016, it lost a dispute against Japan at the World Trade Organization (WTO) on charges that New Delhi unfairly imposed import duties to safeguard its steel industry.

JSW Steel’s Joint Managing Director Seshagiri Rao was quoted last month as saying there was an urgent need to raise duties on steel imports, dubbing them a “major threat” to domestic industry.

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In the first nine months, while exports from India fell by 38%, imports grew faster, Rao pointed out.

With the February 2019 Monthly Metals Index (MMI) report, we can officially move past  2018 and begin to take a look at the world of metals thus far in the new year.

On the trade front, trade officials from the U.S. and China met in January for renewed talks on the ongoing trade standoff between the economic powerhouses. A March 2 deadline approaches, however, after which President Donald Trump had previously indicated the U.S. would up its tariff rate from 10% to 25% on a a wide variety of Chinese imports (worth approximately $200 billion).

However, this week the president indicated he might not stick to that March 2 deadline, which could allow for further negotiations between the two countries if the deadline were postponed.

Meanwhile, in the world of metals, seven of our 10 Monthly Metals Indexes (MMIs) made gains this post month, with the remaining three posting no movement.

A few highlights from this month’s round of MMI reports:

Read about all of the above and much more by downloading the February 2019 MMI Report below:

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This morning in metals news, Big Three automaker Ford Motor Co. has expressed unease about the ramifications of a hard Brexit, Canada reverses a duty on some forms of steel from Mexico and India is considering pushing back a deadline after which more stringent steel import rules were set to go into effect.

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Ford and a Hard Brexit

With a Brexit deadline fast approaching in late March, it’s not surprising to see some businesses pondering the economic impact of a no-deal Brexit.

Ford Motor Co., for example, recently said if the U.K. is not able to secure a deal as it exits the E.U., the result would be “catastrophic,” the BBC reported.

Ford operates three plants in the U.K.: the Dagenham Engine Plant, the Halewood Transmission Plant, the Bridgend Engine Plant and the Dunton Technical Centre, employing a total of approximately 13,000 workers.

Canada Reverses Steel Duties on Forms of Mexican Steel

According to the CBC, Canada has removed 25% import tariffs on two forms of steel from Mexico.

The reversal was effective as of Feb. 2, according to the report, and applies to Mexican energy tubular products and wire rod shipments.

India Mulls Deadline Pushback

As India aims to push domestic steel consumers to consume domestic steel, Reuters is reporting that a deadline for more stringent steel import rules aimed at automakers could be pushed back.

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The government is considering delaying the Feb. 17 deadline by four months, according to the report.

Some call them safeguards, some call them protectionist barriers, and some love them and some hate them.

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Few measures divide like import tariffs.

We have seen it in the U.S. While Europe would claim its own measures are a reaction to the impact of imports following the U.S. Section 232 action, the reality is domestic European producers — led by their trade group, the European Steel Association (EUROFER) — are very much in favor of the European Union’s decision to put in place permanent safeguard measures on steel imports (in place of the provisional ones which have been applied since July 2018).

The new measures differ from the provisional arrangements in part because they were arrived at after careful monitoring of imports in the intervening period. As such, they are so are more targeted, at some 26 product categories, Pan European Networks reports in its publication Government Europa. The tariff of 25% applies to imports that exceed a certain threshold and are designed to ensure sufficient supply is available to consumers without allowing the market to be swamped by excess material, severely depressing prices.

A report in Steel Times quotes Eurofer saying imports have surged by 12% last year, making the need for an effective defense mechanism essential.

Axel Eggert, director-general of EUROFER, is quoted as saying “For every three tonnes of steel blocked by the US’ section 232 tariffs, two tonnes have been shipped to the open EU market.”

The measures do appear to partially reflect consumers concerns, EUROFER says that the final measures include an immediate “relaxation,” increasing the size of the quota by 5% (calculated on the base years of 2015-2017), with a further 5% relaxation in July and another 5% in July 2020, subject to review. Steel demand in 2019 is expected to increase by just 1%.

But, not surprisingly, not everyone is in favor of the measures.

European auto manufacturers association ACEA has called the measures protectionist. It has said that steel exports to the United States have only dropped slightly, and so little extra steel has been diverted to Europe. EUROFER puts the figure at an increase from 20% import penetration historically to 25% import penetration during the monitored period last year – hardly the “significant volumes” touted by UK Steel Director General Gareth Stace.

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If the U.S. reaches a sufficiently attractive trade deal that it decides to remove the Section 232 measures – unlikely, but a possibility – to what extent will Europe remove its new measures?

We will see. In an increasingly protectionist world, barriers are quick to be adopted and slow to be removed.

The Stainless Steel Monthly Metals Index (MMI) jumped seven points this month to 68, translating into an 11.5% increase, the largest monthly increase registered by the MMI since the 10.95% increase in September 2017.

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LME Nickel

Source: MetalMiner analysis of FastMarkets

LME nickel prices surged in early in 2019 after a seven-month downward trend and gained momentum during the second half of January and into early February.

Nickel hit a resistance point at around $13,000/mt when daily volume turned negative again. This price point is significant; once the price broke through this psychological price point last year, $13,000/mt became the support price until strong downward pressure hit prices in early September 2018.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Weakness in the index came from falling surcharges in the basket of tracked stainless steel metals for both 304/304L-Coil and 316/316L-Coil. Why did surcharges fall? The iron ore elemental value fell more than the rising nickel prices.

What This Means for Industrial Buyers

This month the MetalMiner IndX trended upward due to higher global nickel prices, despite falling surcharges.

Only a full MetalMiner subscription gives you access to the detailed pricing data you need for your metals purchasing forecasting.

To get an idea of how to adapt buying strategies to your specific needs on a monthly basis, request a free trial of our Monthly Outlook now.

Actual Stainless Steel Prices and Trends

Most of the metals tracked in the Stainless Steel MMI’s basket increased this month; however,  nickel drove the trend with double-digit price increases tracked for all three prices in the index.

The LME primary three-month price increased 16.08%. Chinese prices increased 14.76%, and Indian prices increased 17.39%.

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The stainless steel 316 CR coil price for China increased 6.57%. U.S. 316 and 304 Allegheny Ludlum surcharges decreased this month by 1.92% and 0.33%, respectively.

[Editor’s Note: This is the second part of our three-part series on how tariff impacts — positive or negative — are perceived, the history of Section 232, and China’s role in the global steel marketplace (and how that has affected the U.S.). In case you missed it, Part 1 can be read here.]

The Bush tariffs of 2002 came as a result of a Section 201, as opposed to a Section 232 investigation. The Trade Act of 1974 covers Section 201 investigations, whereas Section 232 derives its authority as part of the Trade Expansion Act of 1962, based on national security grounds.

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MetalMiner conducted an analysis of every single Section 232 case initiated since the passage of the Trade Expansion Act of 1962. The results suggest market observers need to dig into the details further to see why various presidents have taken action on imports of particular commodities, as well as what types of action they have taken.

Section 232 has been invoked 26 times.

Source: MetalMiner analysis of ITC data

Of the seven times in which a primary metal industry initiated a Section 232 investigation, in only one case — this most recent one — did the president determine action was necessary to adjust imports. However, in one of the cases, President Ronald Reagan agreed to update the National Defense Stockpile.

Of the seven times in which a derivative metal industry (nuts, bolts, bearings, parts) initiated a Section 232 investigation, in no cases did the president conclude action was necessary to adjust imports. However, in one case, for metal cutting and metal forming machine tools, Reagan deferred a decision on Section 232 and instead sought voluntary agreements with foreign suppliers; indeed, one went into effect for a period of five years and was extended for two additional years.

In all other cases, the only industry that received Section 232 relief has been petroleum or oil. Now that the U.S. has achieved energy independence, MetalMiner suspects the U.S. will not see a case made under Section 232 for this commodity (so long as the U.S. remains energy independent).

The U.S., however, is not steel independent, meaning the U.S. does require some level of imports to satisfy domestic demand.

Historical analysis suggests the U.S. has filed about the same number of anti-dumping cases today as it did in the late 1950s-1970s. The difference today, though, comes down to the imposition of duties; far more are implemented today than during that earlier time period.

Logically, as tariffs have steadily declined, imports have grown, while today the number of products targeted for anti-dumping measures has declined since the 1980s.

What Has Changed and Why Should Anyone Care?

In a word: China.

In 1960, China produced a total of 18.5 million tons of steel, whereas the U.S. produced about 6 million tons. Incidentally, the price of a ton of steel in 1962 was $144/ton — or $1,180/ton in today’s dollars!

It wasn’t until 1996 when China first produced 100 million metric tons of steel. And the real growth happened after China ascended to the WTO in 2001, growing steel production from 128.5 million metric tons in 2000 to nearly 495 million metric tons in 2007.

Source: MetalMiner analysis of World Steel Association data

Obviously, as China’s economy began to grow, steel demand also grew. Any market observer would also expect production to increase to support economic growth.

Perhaps the more interesting statistic to examine is production against demand. By looking at the production figures above, one might assume that demand also steadily increased since 2007.

But did it?

Source: MetalMiner analysis of World Steel Association data

In a word: no.

China’s demand peaked in 2013 at 772 million tons, declined and then reached 767 million tons in 2017, whereas China produced 779 million tons in 2013 (a little higher than demand). But in 2017 China produced 831.7 million tons for a surplus of 64.7 million tons.

2018 statistics show China produced more steel than any year in its history — 923 million metric tons, according to Reuters, against a demand projection that is at best flat to slightly up from 2017, based on a MetalMiner analysis. Assuming demand of 780 million tons, that would suggest a surplus of over 140 million metric tons.

U.S. demand and production, in contrast, appears paltry.

It should come as no surprise that the Trump administration has taken significant steps to shore up the domestic industry against Chinese imports.

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The only study that takes into consideration these factors, such as actual demand and actual supply, involved the original Department of Commerce studies on Section 232.

The Raw Steels Monthly Metals Index (MMI) posted a one-point increase this month, moving to an MMI reading of 80.

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Source: MetalMiner data from MetalMiner IndX(™)

As reported last month, steel prices continued to fall from their historically high levels reached back in the spring of 2018.

CRC and HDG prices are back to June 2016 levels, while HRC is still slightly higher than the price point hit following the spring 2016 raw steel price surge.

Source: MetalMiner data from MetalMiner IndX(™)

Steel plate, however, bucked the trend with a price gain into February. It remains to be seen if it will break the previous price resistance point hit earlier in the month, a historical high of $1,004/st for the MetalMiner Index.

While raw materials, such as coking coal and iron ore, typically trade in the same pattern, in January they traded differently.

Coking coal prices moved sideways, while iron ore prices increased sharply this month on the back of a 10% production cut announced by Brazilian iron ore miner Vale SA.

Moreover, iron ore prices may continue to rise if the Chinese government prohibits expansion of iron ore and steel projects in 2019.

China continues to struggle with industrial pollution in the top steelmaking city of Tangshan and in the industrial province of Henan.

What This Means for Industrial Buyers

Plate prices may be at or close to their peak.

Meanwhile, buying organizations will want to pay close attention to any price changes, particularly to the upside (in fact prices have notched up for HRC, CRC and HDG in the opening days of February) to determine if the current downtrend shifts to a sideways trend.

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Actual Raw Steel Prices and Trends

Chinese coking coal prices continued to climb this month, increasing another 15.5% on top of last month’s 23% increase, ending at $315.18/mt, which was still lower than October’s $348/mt.

Korean standard scrap steel also increased in price again this month, adding a 12% increase on top of last month’s 6% increase, ending the month at $175.33, also recovering and still lower than the recent October high of $193.69/mt.

Chinese steel slab increased 7% to $566/mt.

U.S. shredded scrap fell 11% to $314/st.

ungvar/Adobe Stock

The Construction Monthly Metals Index (MMI) held flat, sticking at 82 for the third straight month.

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U.S. Construction Spending

U.S. construction spending in November (the most recently available data) hit an estimated $1,299.9 billion, up 0.8% from the October total $1,289.7 billion.

November spending marked a 3.4% increase from the November 2017 construction spending total.

For the first 11 months of the year, spending hit $1,200.7 billion, a 4.5% increase from the January-November 2017 period (when spending hit $1,149.3 billion).

Under private construction, spending hit $993.4 billion in November, marking 1.3% increase from the revised October total of $980.4 billion. Furthermore, residential construction hit $542.5 billion, up 3.5% from October. Meanwhile, nonresidential construction hit $524.2 billion, down 1.2% from October.

As for public construction, spending reached $306.5 billion, 0.9% below the October total of $309.3 billion. Educational construction hit $76.7 billion, marking a 2.0% drop from October’s $78.3 billion. Highway construction spending reached $93.4 billion, up 1.7% from October’s $91.8 billion.

Architecture Billings Index

The Architecture Billings Index (ABI), released monthly by the American Institute of Architects, indicated modest billings growth to close 2018.

The December ABI came in at a value of 50.4 (anything greater than 50 indicates growth). The December ABI marks a drop from the previous month, when it reached 54.7.

“But despite flat billings in December, firm billings increased every month of the year in 2018,” the ABI report states. “And while concern about a potential economic slowdown looms for 2019, firms are not yet seeing any clear signs of it in their project workloads.”

Billings growth was the strongest in the Midwest, which posted an ABI of 56.3. Trailing the Midwest were the Northeast (51.6), South (49.4) and the West (49.2).

On the jobs front, the report notes the construction sector added 280,000 jobs in 2018, an uptick of 30,000 from the construction jobs added in 2017.

This month’s ABI survey of architecture industry professionals asked about the stock market volatility December and its level of impact on billings growth.

According to the ABI report, just 5% of respondents indicated the December volatility impacted their current projects, while an additional 29% reported “they have heard rumblings of potential impacts but haven’t seen anything definitive just yet.”

Actual Metal Prices and Trends

Chinese rebar steel ticked up 0.5% month over month to $559.36/mt as of Feb. 1. Chinese H-beam steel also moved up 4% to $559.36/mt.

U.S. shredded scrap steel fell 11.0% to $314/st.

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European commercial 1050 aluminum sheet fell 0.5% to $2,654.15/mt. Chinese aluminum bar rose 3.1% to $2,152.41/mt. Meanwhile, 62% iron ore PB fines rose 2.6% to $78.31 per dry metric ton.

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A recent article by CBC in Canada highlights the mess that has resulted from the imposition of steel and aluminum tariffs between the U.S. and Canada.

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It is fair to say the same mess is almost certainly prevailing on the U.S. side of the border.

The only winner seems to be the Canadian Treasury —and, likewise, the U.S. Treasury — which is raking in tariff duties from consumers having to pay more money on imported steel and aluminum.

CBC quotes Finance Canada data suggesting $839 million has been collected; the figure will hit over $1 billion by the time Canadian Finance Minister Bill Morneau announces his pre-election budget this spring.

Quite how he will handle this unexpected windfall remains to be seen.

Read more

AK Steel on Monday reported its Q4 2018 and full-year earnings, posting net income of $33.5 million in the fourth quarter and adjusted net income of $48.0 million (compared with a loss in Q4 2017).

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For the full year, AK Steel reported net income of $186.0 million and adjusted net income of $200.5 million (up 25% from 2017).

“We made good progress in 2018, generating our highest net income and adjusted EBITDA in a decade and further strengthening our balance sheet,” CEO Roger K. Newport said. “Additionally, during the course of the year we expanded our portfolio of steel solutions, as our advanced steel operations accelerated collaboration with our downstream stamping, tooling and tubing businesses at Precision Partners and AK Tube.

“As we enter 2019, we are well positioned after the successful renegotiation of our annual customer contracts and expect another solid year.”

The company posted adjusted earnings before interest, taxation, depreciation and amortization (EBITDA) of $563.4 million in 2018, up from $528.5 million in 2017.

“Higher steel selling prices and shipments during 2018, particularly to the distributors and converters market, more than offset higher costs for certain raw materials and supplies, including graphite electrodes, compared to a year ago,” the company’s earnings release stated.

In operational news, the company announced it would close the “largely-idled” Ashland Works facility by the end of 2019 to “increase utilization” at its other U.S. operations. The plant employs 230 people and the closure would yield approximately $40 million in annual cost savings, according to the company.

“More than three years ago, AK Steel idled most of the Ashland Works operations, including the blast furnace, but continued to operate a single hot dip galvanizing coating line with 230 employees,” the company release stated. “The company plans to increase its operating efficiency and lower its costs by completing the shutdown of the blast furnace and steelmaking operations within the next several months, and by working with its customers to transition products coated at Ashland Works to other AK Steel operations in the United States with available capacity before the end of this year. This will increase those operations’ utilization rates.”

The company plans to offer the Ashland Works employees positions at other facilities, the release stated.

The company touted the cost savings from the plant closure and the Trump administration’s trade policies as beneficial to its long-term growth picture.

“These savings, combined with the positive impact of the Administration’s policies to address unfair trade practices, will help facilitate the company’s longer term growth plans,” the release stated. “It will also help maintain and enhance the company’s more cost effective steelmaking facilities and further drive growth and innovation.”

In other earnings report news, the company announced it will begin providing guidance on an annual basis, and will no longer provide quarterly guidance.

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The company expects 2019 net income to be between $160 million and $180 million, with an expected adjusted EBITDA range of $515 million to $535 million.