steel price

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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.

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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.

According to a World Steel Association report, global crude steel production increased 4.6% last year compared to 2017.

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Crude steel production increased in every region except the E.U. E.U. production declined 0.3% year over year.

Overall, production growth slowed from the 6.3% year-over-year increase in 2017.

Global steel production in 2018 reached 1,808.6 million tons (MT). Asia produced approximately 70% of that total at 1,271.1 MT, up 5.6% year over year. China produced the bulk Asian production at 928.3 MT, marking a 6.6% year-over-year increase.

China’s piece of the global steel production pie increased from 50.3% in 2017 to 51.3% in 2018.

India’s crude steel production jumped 4.9% to 106.5 MT. Of note, India surpassed Japan as the second-largest steel-producing country in the world last year.

Japan produced 104.3 MT in 2018, down 0.3% compared to 2017. South Korea produced 72.5 MT of crude steel in 2018, an increase of 2.0% compared to 2017.

As mentioned, E.U. production fell 0.3%, down to 168.1 MT of crude steel in 2018. Germany’s production fell 2.0%, down to 42.4 MT. Italian production rose 1.7% to 24.5 MT. France’s production fell 0.7%, while Spain’s production fell 0.1%.

North American production hit 120.5 MT, up 4.1%. U.S. steelmakers, buoyed by the Trump administration’s Section 232 action, churned out 86.7 MT, a 6.2% jump from 2017.

The Commonwealth of Independent States (CIS) produced 101.3 MT, up 0.3%. Russia produced 71.7 MT of that total, marking a 0.3% year-over-year increase. Ukraine’s production fell 1.1% to 21.1 MT.

South America saw its production tick up 1.3% to 44.3 MT. Brazil accounted for 34.7 MT of that total, good for a 1.1% increase.

The Middle East produced 38.5 MT of crude steel in 2018, up 11.7% from 2017. Iran accounted for 25.0 MT in 2018, up 17.7%.

Turkey’s crude steel production, in what was a tumultuous 2018 for the Turkish steel sector, hit 37.3 MT, down by 0.6%. Amid a diplomatic row with the U.S. over the detention of American pastor Andrew Brunson, in August 2018 the Trump administration doubled its Section 232 tariffs on steel and aluminum vis-a-vis Turkish imports (raising the rates to 50% and 20%, respectively).

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By country, the top 10 steel-producing countries of 2018 were:

  1. China: 928.3 MT
  2. India: 106.5 MT
  3. Japan: 104.3 MT
  4. U.S.: 86.7 MT
  5. South Korea: 72.5 MT
  6. Russia: 71.7 MT
  7. Germany: 42.4 MT
  8. Turkey: 37.3 MT
  9. Brazil: 34.7 MT
  10. Iran: 25.0 MT

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Domestic steel prices have been in a downtrend since August, when prices started to show the first signs of weakness.

All forms of steel, except plate, have showed downward price momentum.

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Source: MetalMiner data from MetalMiner IndX(™)

Historically, steel prices move lower during Q3 and part of Q4. When the budgeting season starts, mills begin to raise steel prices.

For the past three years, steel prices have increased at the end of Q1, just a little delayed from the general Q4 increase.

However, this year the price increase remains in hibernation.

Steel prices continue to move lower and lead times have not increased. In fact, lead times remain the shortest in a year.

Therefore, steel price increases do not seem justified for HRC, CRC and HDG.

Plate Prices — Why Are They Moving Differently?

Meanwhile, plate prices have followed their own trend.

Plate prices have remained well-supported so far. While other forms of steel have seen price declines since August, plate prices continue to trade sideways.

In fact, plate prices have increased during this time.

Source: MetalMiner data from MetalMiner IndX(™)

Plate prices in general have less volatility than other forms of steel. Plate prices often trade sideways in one direction for a long time, then suddenly shift and move into a different trend.

Lead times combined with strong demand have supported plate prices. Most steel producers see lower automotive numbers, but demand from plate-consuming industries remains stronger.

While all the other steel forms have had shorter lead times during the year, with increasing domestic capacity utilization, plate lead times continue to lengthen.

Chinese Steel Prices

The 800-pound gorilla, China, offers a window into what may happen to domestic prices.

Chinese steel prices have fallen since September 2018. Steel prices have been softer in China this year, driven by signals of weaker demand and a slower manufacturing index.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

Current domestic steel prices appear to be in a downtrend.

Adapting the right buying strategy becomes crucial to reducing risks. Only the MetalMiner monthly outlooks provides a continually updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

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

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

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This morning in metals news, aluminum producer Alcoa Corporation reported its fourth-quarter and full-year 2018 results, India is considering a higher iron ore import duty and Shanghai steel futures moved up.

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Alcoa Reports 4Q Earnings

Pittsburgh-based aluminum producer Alcoa Corporation reported its fourth-quarter and full-year 2018 earnings this week, reporting adjusted net income of $125 million, excluding special items, for the final quarter of 2018.

The 4Q net income total was up from $119 million in the third quarter but down from $195 million in 4Q 2017.

For 2018 as a whole, the company reported adjusted net income excluding special items of $675 million, up from $563 million in 2017.

“Despite sequentially weaker commodity prices, we had a strong fourth quarter with higher profits in our Bauxite and Alumina segments,” President and CEO Roy Harvey said. “With the help of higher market prices earlier in the year, we increased annual profits, addressed liabilities, significantly strengthened our balance sheet, and began returning cash to stockholders. With markets likely to remain dynamic in 2019, we will focus on what we can control to continue improving our operations, addressing challenges with agility, and making the most of opportunities in the year ahead.”

In 2019, Alcoa projects a global aluminum deficit between 1.7 million and 2.1 million metric tons. In addition, Alcoa reported the global alumina market came in at a deficit of 0.6 million metric tons.

“In 2019, the Company expects the alumina market to move to a surplus that is projected to range between 0.2 million and 1 million metric tons, which assumes ongoing, third-party supply disruptions in the Atlantic region,” Alcoa states. “The projected alumina surplus is driven by China, where refining expansions are expected to outpace demand growth from smelting.”

India Considers Hiking Iron Ore Duty

According to a report from Creamer Media’s Mining Weekly, the Indian government is considering an increase to its iron ore import duty.

Per the report, domestic industry has lobbied the government to increase the current 2.5% duty on imported iron ore.

Shanghai Steel Picks Up

Global steel prices have lagged of late, but Thursday was a positive session for Shanghai steel futures, Reuters reported.

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Per the report, the most-traded rebar contract on the SHFE ticked up 0.8%, while hot rolled coil was also up 0.8%.

Base metals traded higher at the beginning of January. However, momentum appears to be weaker once again.

The DBB index has shown weakness since June 2018, when it started this short-term downtrend. MetalMiner has recently revised its market outlook, advising buying organizations to closely follow how the index develops.

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DBB index. Source: MetalMiner analysis of Yahoo Finance

Since 2016, the DBB base metals complex has remained in a long-term trend (see the chart below). Base metal prices have skyrocketed since then but moved lower in 2018, when concerns about the Chinese economy started to appear.

DBB index long-term trend. Source: MetalMiner analysis of Yahoo Finance

A weaker Chinese economy will move demand lower. However, 2018 closed with the six base metals in global deficit. Supply and demand has not moved; therefore prices, mostly economic expectations and trading changes have driven base metal markets.

The Drivers

The DBB index comprises three base metals: aluminum, copper and zinc.

LME aluminum prices moved higher at the beginning of January, but prices did not breach the $1,970/mt level that acted as a support for most 2018. Prices being unable to breach that support level signals weakness for the base metal complex.

LME Aluminum prices. Source: MetalMiner analysis of FastMarkets

Both LME copper and LME zinc prices started to increase slightly at the beginning of January. Similar to aluminum, prices of both base metals fell. LME copper remains below the $6,000/mt level, which has served as the psychological ceiling for copper prices.

What This Means for Industrial Buyers

The base metals complex seems seems weaker. MetalMiner recently switched the long-term uptrend to a sideways trend.

Buying organizations may want to follow price dynamics closely, as well as each specific base metal price. Adapting the right buying strategy becomes crucial to reducing risks.

Only the MetalMiner Monthly Outlook reports provide a continually updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

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

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

With the January 2019 Monthly Metals Index (MMI) report, we can close the book on 2018 and what was a wild year in the world of metals and metals price movements.

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It was a book that closed with a pessimistic chapter for metals (and commodities in general), with many posting price declines as markets feel the effect of simmering trade tensions between the U.S. and China.

In our latest MMI report, you can read about all of the latest news and trends in our 10 metals subindexes: Automotive, Construction, Rare Earths, Renewables, Aluminum, Copper, Stainless Steel, Raw Steels, GOES and Global Precious.

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

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

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This morning in metals news, China is eyeing improvements to its steel capacity structure, China’s 2018 aluminum exports surged and Shanghai rebar futures hit a two-month high.

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China’s Steel Structure

According to Reuters, China is looking to shift the focus of its steel industry in 2019 from one of fast growth to more optimized, high-quality development.

The report cites Yu Yong, chairman of the China Iron and Steel Association, who said a major push in 2019 will come in the form of “optimising production structure, adjusting layout of steel mills and pushing merger and acquisition.”

China’s Aluminum Exports Surge

China’s exports of unwrought aluminum and aluminum products jumped 20.9% in 2018 year over year, S&P Global Platts reported.

Per the same report, December exports were up 19.8% on a year-over-year basis.

Shanghai Rebar Price on the Rise

The Shanghai rebar price hit a two-month high Monday, Reuters reported.

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According to the report, rebar futures rose 1.6% to reach $528.44 per ton.

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They call it the law of unintended consequences and, broadly speaking, it was intended by the American sociologist Robert K. Merton to mean unintended consequences are outcomes that are not the ones foreseen and intended by a purposeful action — particularly actions of a government.

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Well, I don’t for one minute expect President Donald Trump gave much thought to the consequences for the rest of the world of his decision last year to slap 25% import tariffs on steel products from the rest of the world.

His focus was largely on a domestic audience and if he gave thought at all for the international consequences, it was probably the impact on China. Although steel imports into the U.S. from China were not as large as from suppliers like Russia, Ukraine, Brazil and Canada, the cumulative impact of deterring those suppliers from the U.S. market has been an increase in metal looking for a home in Europe.

The E.U. imposed a number of policies in response to the perceived threat of increased steel imports. One was to demand that most steel (and aluminum) imports into the E.U. apply for a form of licence, called Prior Surveillance. The measure is not designed to control imports as much as to monitor the precise origin, down to the level of manufacturer, probably with the intention of applying quotas or anti-dumping action at the manufacturer level at some stage in the near future.

But in the meantime, the E.U. feels it needs more of a blanket approach. As such, the European Commission has announced it will prolong until July 16, 2021, a 25% tariff on more than 20 types of steel ranging from stainless hot-rolled and cold-rolled sheets to rebars and railway material when the shipments exceed the average over the past three years.

According to the Gulf Times, 26 types of steel will be covered by the E.U.’s definitive measures, compared with 23 product categories under the provisional system and 28 within the scope of the original probe representing some 40% of the E.U.’s annual iron and steel imports.

The E.U.’s decision has not been met with universal approval. The decision was immensely popular among steel producers who pushed for the measures; however, consumers like the automotive sector called the move unhelpful and a cause of “regret,” according to S&P Global.

The European Automobile Manufacturers’ Association (ACEA) was quoted as saying “ACEA questions the need for such trade protectionist measures. In the automotive sector, access to EU steel production is extremely tight and imports remain necessary to fill supply-chain gaps.”

ACEA points out any increase in imports is down to increased consumption, not increased market penetration by overseas mills, saying “Motor vehicle manufacturing has increased by 5 million units per year since 2014, and some increase in steel imports has been necessary to meet this higher demand.”

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

It would seem U.S. carmakers and the wider steel-consuming industry are not alone in facing higher prices going into 2019.

As GDP growth slows — recent data shows it is certainly slowing in Europe and China — manufacturers’ factory gate prices will come under pressure as this translates into lower sales. Heightened raw material inputs will therefore squeeze margins in the year ahead.