steel price

We had a little mythbusting discussion the other day here at MetalMiner®, including, among other examples, that tracking raw material inputs is no predictor of finished product prices.

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Take, for example, iron ore.

Prices fell this spring and have been bouncing around either side of $65/ton. However, in China, the world’s biggest consumer, finished steel prices and production have been ripping along.

According to Reuters, China produced 80.2 million tons of crude steel last month, setting a new daily average production record for a third month in a row at 2.67 million tons.

Despite strong domestic steel prices, China’s steel exports last month rose to 6.94 million tons, their highest level since July 2017. Older, more polluting mills continue to be shuttered as part of Beijing’s program to curb pollution via increased inspections.

Reuters sees this as evidence that newer mills have ramped up operations to cash in on fat margins. China’s steel output in the first half of the year rose 6% to 451.2 million tons.

Richard Lu, analyst at CRU in Beijing, is quoted as saying that mills were earning a profit margin of about 800 yuan ($119.50) per metric ton of steel, while analysts at Huatai Futures put profit margins for mills in northern China at over 1,000 yuan per ton — one of the highest on record, the news source says.

Mill utilization still has further to go though; despite record output, mills are not running flat out. Monthly utilization rates reached 71.6% in June — the highest since October — but suggestive output levels could continue into the winter heating season, even as mills around major cities are made to close to reduce pollution.

However, that would presuppose demand remains robust; signs are beginning to emerge that demand is softening.

RBC Capital Markets mining analyst Paul Hissey is quoted as saying the bank expects steel demand to fall in H2 due to a slowdown in infrastructure and property demand and continued volatility around tariffs.

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Ultimately, a softening in steel demand will lead to a fall in steel prices; it is the anticipation of such that is a factor in falling iron ore prices.

As we noted, the correlation in raw material and finished product prices is stronger in falling markets than rising, despite the raw material price falls leading the finished product.

Source: wto.org

Ultimately, it went along expected lines.

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India and a handful of other nations held trade dispute settlement consultations with the United States over its steel and aluminum tariffs in Geneva, but got absolutely no concession from the latter, according to reports coming out of the meetings.

India, Canada and Mexico confabulated with the U.S. on the issue of the latter imposing additional duties of 25% & 10% on steel and aluminum imports.

Earlier this month, China, Norway and the European Union also held similar talks with the U.S., under the aegis of the World Trade Organization (WTO) in Geneva. Almost all such disputes are held under Article 4 dispute settlement consultations. MetalMiner previously reported about the Geneva meeting and its attempt to try and break the trade tariff imbroglio.

The U.S., as many had expected, stuck to its guns that no law required it to provide any reason for the Section 232 measures on steel and aluminum, since they remain “sovereign determinations” that fall under Article 21 of the GATT 1994, according to media reports.

Apparently, in an earlier meeting, the U.S. told the representative of another country in such a meeting that Section 232 revolved around issues of national security, and was thus not available for review or capable of resolution by WTO dispute settlement.

Representatives of India and other nations raised several questions around the proposed tariffs. They claimed the additional duties constituted a “disguised safeguard” measure, as the U.S. Department of Defense had said that there was no threat to the country’s national security from steel and aluminum imports.

The U.S. delegation, on the other hand, maintained it was unable to share the reasons for the decisions under the Section 232 provisions. Delegates also wondered how countries such as Australia, Brazil, Korea and Argentina had been exempted from similar additional duties, and why these imports did not pose a national security threat to the U.S.

Clearly, unable to get much from the U.S. at this meeting, the only recourse the six nations may have is to approach the WTO with a request to establish a disputes settlement panel to rule against the U.S. measures.

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In March this year, the U.S. had also launched a challenge at the WTO against India’s export subsidies, arguing the programs give Indian companies an unfair advantage. The U.S. claimed these export subsidy programs harmed American workers by creating an uneven playing field on which they must compete.

Andrey Kuzmin/Adobe Stack

The European Union (E.U.) posted a 3% increase in apparent steel consumption during Q1 2018 compared with Q1 2017, according to a recent European Steel Association (EUROFER) report.

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According to EUROFER, the E.U. steel market began 2018 on “relatively strong footing,” but that rising trade tensions could knock the sector off course.

“The latest data confirms the severe impact the US Section 232 tariffs are having by deflecting imports into the EU – with surges across almost all product lines,” said Axel Eggert, EUROFER director general, in a release. “This surge is occurring at the same time as growth predictions are being revised onto flatter trajectories. We cannot risk the ongoing recovery being put at stake– and welcome the recent EU safeguard in its efforts to stabilise the sector.”

According to the report, real steel consumption and seasonal restocking are factors explaining the 3% rise in apparent consumption during Q1.

Domestic deliveries to the E.U. market rose 2.1% during the aforementioned period. Meanwhile third-country imports rose by 9.8% to 10 million tons, hitting the highest quarterly total since Q3 2007, according to EUROFER.

“This confirms that the volume effects of anti-dumping measures imposed by the European Commission over the course of 2017 faded out rapidly due to other third country suppliers filling the gap left by the countries which had duties applied to them,” the report states.

As for steel demand, the EUROFER report projects growth to continue in 2018 and 2019, but notes the uncertainty of “international steel fundamentals.”

“The sharp rise in imports of specific steel product from some third countries confirms that steel trade distortions remain a threat, which could be exacerbated by trade deflection resulting from the Section 232 tariffs applied by the Trump administration,” the report argues.

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Other highlights from the EUROFER report:

  • In Q1 2018, all steel-using sectors in the E.U. posted production growth (except for steel-tube manufacturing).
  • Production activity is forecast to grow 2.8% in 2018 and 1.9% in 2019.
  • Economic growth in the E.U. fell to 0.4% quarter-on-quarter in Q1 2018, down from 0.7% in Q4 2017.

The U.S. Department of Commerce. qingwa/Adobe Stock

Last week, the U.S. Department of Commerce announced it had launched anti-dumping (AD) and countervailing duty investigations of steel rack imports from China.

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The alleged dumping margins in the AD case are 130.0-144.5%, according to a DOC release.

The DOC added there 28 alleged subsidy programs for steel racks, “including five preferential loan and interest rate programs, one debt-to-equity swap program, six income tax and other direct subsidy programs, two indirect tax programs, seven less than adequate remuneration (LTAR) programs, as well as seven grant programs.”

The petition in the case was filed by the Coalition for Fair Rack Imports, which estimates that imports of steel racks in 2017 were valued at approximately $200 million.

Products covered in the investigation includes “steel racks and parts thereof, assembled, to any extent, or unassembled, including but not limited to, vertical components (e.g., uprights, posts, or columns), horizontal or diagonal components (e.g., arms or beams), braces, frames, locking devices (i.e., end plates and beam connectors), and accessories (including, but not limited to, rails, skid channels, skid rails, drum/coil beds, fork clearance bars, pallet supports, column and post protectors, end row and end aisle protectors, corner guards, row spacers, and wall ties).”

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The U.S. International Trade Commission is scheduled to make a preliminary ruling by Aug. 6, with the DOC following suit Sept. 13.

niyazz/Adobe Stock

The U.S. and India are scheduled to sit across the table this week in Geneva to discuss the case filed by India with the World Trade Organization’s (WTO) dispute settlement mechanism over the U.S.’s imposition of import duties on steel and aluminum.

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The talks will be held under the aegis of WTO’s dispute settlement mechanism, according to a news report by the Press Trust of India.

India is part of the group of nations — which includes China, Russia and Norway, among others — to have filed separate dispute claims on the topic with the WTO. The meeting is part of the consultations the U.S. will be holding with all such countries on July 19-20.

It may be recalled that the U.S. had imposed a 25% tariff on steel and a 10% tariff on aluminum imports from India. India’s exports of the two commodities to the U.S. stands at about U.S. $1.5 billion per annum. India had initially tried to raise the issue with the U.S., and then informally with the WTO, calling the move an “abuse of global trade provisions that could spiral into a trade war,” — sentiments similar to the one expressed by India’s neighbor, China.

In May, India dragged the U.S. to the WTO dispute settlement mechanism over the imposition of import duties.

Consultation is the first step of the dispute settlement process. Incidentally, both the countries are already involved in disputes at the global trade body in the areas of poultry, solar, and export subsidies, to name a few.

According to another news report, senior trade officials of India and the U.S. will meet later this month in Washington to conclude negotiations on a “mutually-acceptable trade package.” Quoting an unnamed official source, it said the meeting comes amid an escalation of the global trade war.

Since India’s proposed additional tariff worth U.S. $235 million on 29 U.S. goods — including almonds and apples — are retaliatory in nature, any rollback of the additional duty on Indian steel and aluminum by the U.S. will lead to a withdrawal of corresponding taxes by the Indian Government on U.S. goods, too.

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The U.S. sees good prospects for its companies in the Indian civil aviation, oil and gas, education service, and agriculture segments.

It was another busy month in the world of metals.

Then again, these days quiet months in metals or in trade, generally, are few and far between.

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Trade tensions continued to rise, as $34 billion in tariffs on Chinese goods went into effect (China responded in kind), and an additional $16 billion in tariffs are under review. This week, President Donald Trump announced the intention to impose an additional $200 billion in tariffs on China, ratcheting up the stakes even further.

Meanwhile, a Section 232 investigation focusing on imports of automobiles and automotive components is unfolding. More than 2,300 public comments were submitted as part of the U.S. Department of Commerce’s review process, and public hearings are scheduled for next week.

Meanwhile, in metals markets, most base metals were down last month, with steel being the exception.

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A few highlights from this month’s round of Monthly Metal Index (MMI) reports:

  • Since peaking at $7,316/mt in June, the LME copper price dropped 12%.
  • The subindex for grain-oriented electrical steel was the only MMI to post an increase on the month.
  • The U.S. silver price hit its lowest level since January 2017, while U.S. gold bullion dropped to a one-year low.
  • Aluminum prices were also part of the general downtrend, as prices continued to move away from this year’s April peak (after Russian companies and their owners, including aluminum giant Rusal, were slapped with sanctions by the U.S.).

Read about all of the above and much more by downloading the July MMI report below.

The Raw Steels Monthly Metals Index (MMI) fell two points this month, dropping to 90 from the previous 92 reading.

Domestic steel price momentum continued, as domestic steel prices increased again. Chinese steel prices also increased in June, adding support to domestic steel prices.

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Domestic steel prices remain at a more than seven-year high.

Source: MetalMiner data from MetalMiner IndX(™)

Steel prices also increased at the beginning of July (except for HDG, which dropped slightly). The pace of the increases seems to have slowed, but prices remain in an uptrend. Therefore, buying organizations can expect high steel prices.

However, the historical cyclicality may move prices lower at some point.

Domestic steel prices have stayed in a sharp uptrend since January 2018. Current prices have started to trade more sideways. Despite the increase in prices, prices may begin to come off slightly at some point this year. Buying organizations may want to identify that moment to commit to purchases and reduce risks.

The Spread

The CRC-HRC domestic spread appears to be back at its historical level.

The domestic spread should be around $100/st. However, in 2016 the spread started to increase, reaching more than $200/st. The spread currently stands at $111/st.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese Steel Prices

Chinese steel prices recovered from a previous downtrend and increased again in June.

Early July price indications show slightly lower prices. However, Chinese steel prices appear to be in a recovery uptrend.

All Chinese forms of steel have dropped slightly so far in July (except HDG prices, which inched higher).

Source: MetalMiner data from MetalMiner IndX(™)

Chinese steel output increased again in May, despite steel product exports dropping around 20% during the first four months of the year. Strong Chinese domestic demand has kept mills running at full capacity.

However, Chinese steelmakers are currently seeking alternative markets, such as Africa and South America.

What This Means for Industrial Buyers

Since steel prices remain high, buying organizations may want to closely follow price movements to decide when to commit to mid- and long-term purchases.

Buying organizations looking for more clarity on when to buy and how much to buy may want to take a free trial now to our Monthly Metal Buying Outlook.

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Actual Raw Steel Prices and Trends

The U.S. Midwest HRC 3-month futures price fell this month by 5.86%, falling to $852/st.

Chinese steel billet prices decreased again this month by 0.17%, while Chinese slab prices fell further by 3.72%, moving to $640/mt.

The U.S. shredded scrap price closed the month at $371/st, trading flat from last month’s reading.

The Raw Steels Monthly Metals Index (MMI) increased three points this month, moving up for a June reading of 92.

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Domestic steel price momentum seems to keep going, with domestic steel prices increasing again. Chinese steel prices also increased in May, adding support to higher domestic steel prices.

Domestic steel prices remain at more than seven-year highs.

Source: MetalMiner data from MetalMiner IndX(™)

Steel prices also increased at the beginning of June. The pace of the increases seems to have slowed down, but prices remain in an uptrend.

Tariffs

June 1 served as the latest steel and aluminum tariff exemption deadline. However, on May 31 President Trump announced that no country exemptions will continue. Therefore, Canada, Mexico and the E.U. became subject to the steel and aluminum tariffs of 25% and 10%, respectively.

MetalMiner considered different policy scenarios with regard to tariffs. All of them — except a continued exemption of the steel tariffs — supported the U.S. domestic steel price increase. The current situation will support steel prices further.

Mexico has already hit back with trade tariffs on some other products (such as pork and bourbon) from the U.S.

Chinese Steel Prices

Chinese steel prices recovered from a  previous downtrend and increased again in May. Early June price indications also show higher prices and a recovery in Chinese steel prices.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese steel prices fell in conjunction with their historical seasonal cycle, which appeared stronger due to the overcapacity closures and higher-than-expected production during the winter season in China. However, prices usually start to increase again around April-May, signaling the start of the construction season, when steel demand is high.

Despite recent price increases, Chinese steel remains cheaper than U.S. domestic steel (even with a  25% steel tariff). This comes down to the price run-up of U.S. domestic steel prices, which have moved toward 2012 highs.

Scrap Steel

Contrary to domestic steel price movements, domestic shredded scrap traded more sideways at the beginning of June. Price increases have slowed down, as shredded scrap prices moved toward 2014 levels.

Source: MetalMiner data from MetalMiner IndX(™)

However, given the current domestic steel price movements, buying organizations can expect higher shredded scrap prices in the coming months.

What This Means for Industrial Buyers

As steel prices remain high, buying organizations may want to follow price movements closely to decide when to commit to mid- and long-term purchases.

Buying organizations looking for more clarity on when to buy and how much to buy may want to take a free trial now to our Monthly Metal Buying Outlook.

Actual Raw Steel Prices and Trends

The U.S. Midwest HRC 3-month futures price increased this month by 12.4%, going up to $905/st.

Chinese steel billet prices decreased by 0.2%, while Chinese slab prices rose by 1.2%, moving to $665/mt.

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The U.S. shredded scrap price closed the month at $370/st, trading flat from last month’s reading.

The Stainless Steel Monthly Metals Index (MMI) skyrocketed this month, increasing by seven points. The current reading stands at 84.

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The index inched higher driven by the increase in stainless steel surcharges and a sharp increase in LME nickel prices in May. Other related metals in the stainless steel basket also increased.

LME Nickel

Nickel price momentum seems to have recovered again.

LME nickel prices increased at a quicker pace in May. The increases continued through the beginning of June, driving prices to 2014 highs. 

Source: MetalMiner analysis of FastMarkets

LME nickel prices keep moving away from 2017 lows.

MetalMiner previously recommended buying some volume forward. Given the current uncertainty in the steel and stainless industries, nickel prices remain supported for the short term.

In addition, a fundamental tightness in the nickel market has added support to the latest nickel price increases.

Domestic Stainless Steel Market

Following the recovery in stainless steel momentum, domestic stainless steel surcharges increased again this month. The 316/316L-coil NAS surcharge reached $1.02/pound.

Source: MetalMiner data from MetalMiner IndX(™)

The pace of stainless steel surcharge increases, however, appears to have slowed again this month. Yet stainless steel surcharges remain in a clear uptrend and rest well above 2015-2017 lows.

What This Means for Industrial Buyers

Stainless steel momentum appears stronger this month, as steel prices are skyrocketing. As both steel and nickel remain in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips.

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.

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Actual Stainless Steel Prices and Trends

Chinese 304 stainless steel coil prices increased again this month by 2.02%, while Chinese 316 stainless steel coil prices rose further by 6.61%. Chinese Ferrochrome prices increased this month by 2.9%, to $1,990/mt.

Nickel prices increased by 10.5% to $15,210/mt.

After the instability in the industrial metals complex in April, May closed with an overall increase in metal prices.

However, the increases are, in general, less sharp and less volatile than last month.

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Aluminum, Copper and Nickel

The three main metals have seen slight increases in prices.

The LME aluminum price pace seems to have slowed down after the deadline for U.S. sanctions on  Russian aluminum companies moved to Oct. 23. However, aluminum prices could remain supported given the current turmoil.

Source: MetalMiner analysis of FastMarkets

Zinc and Lead

Meanwhile, the close brothers zinc and lead seem to have gotten into a little disagreement.

Zinc prices fell slightly in May. However, lead prices increased at the beginning of the month. The increase comes after lead prices fell to support levels, the buying dip MetalMiner recommended buying organizations take advantage of. Buying organizations following the Monthly Metal Outlook had the opportunity to lock in lower prices then.

Source: MetalMiner analysis of FastMarkets

The lead price’s upward trend seems strong, as buying volume supports the increase. Therefore, buying organizations can expect lead prices to move higher.

Zinc buyers may want to follow zinc movements closely this month, too.

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Steel Prices Continue to Rise

Steel prices remain at more than seven-year highs. Steel prices continued the slight increase in May.

Buying organizations who want to read more about steel price trends and the tariff exemption analysis should take a free trial of our Monthly Outlook now.