Steel

The Raw Steels Monthly Metals Index (MMI) rose by 12.7% month over month to 121, as scrap prices made gains this past month.

January 2022 Raw Steels MMI chart

U.S. steel prices continue to retreat from their 2021 peaks. At the start of the year, hot rolled coil prices sat almost 18% below the October high.

US steelmakers invest in scrap processing

As electric arc furnace (EAF) capacity expands, U.S. steelmakers are working to secure steel scrap supply, as the Wall Street Journal explained in a recent report.

In November, Cleveland-Cliffs purchased Ferrous Processing & Trading Co. for $775 million. The company represents 15% of the U.S. prime market. As Cleveland-Cliffs is the largest steel supplier to the auto sector, the acquisition will allow Cleveland-Cliffs to negotiate scrap collection from its own customers.

Also in November, North Star BlueScope purchased steel-scrap processing operations and the Delta Yard for $240 million from MetalX.

These recent purchases follow Nucor’s own acquisitions of both Garden Street Iron and Metal Inc. and Grossman Iron and Steel Co. Nucor currently operates 65 scrapyards. Its newest additions will serve to feed its forthcoming or expanding mills.

In total, investments from top steelmakers in scrap processors exceeded $1 billion in 2021.

EAFs, which are fed by scrap, currently account for roughly 70% of U.S. steel production. That share is expected to grow in the coming year as even more capacity comes online. Around 8 million tons of flat-rolled steel capacity was added over the past few years and an additional 10 million tons will be added by the end of 2024. North Star BlueScope alone will grow its own steel capacity by around 40% in 2022.

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This morning in metals news: U.S. steel prices have continued to decline; OPEC will continue its output increase schedule in February 2022; and, lastly, Alcoa at the end of last year announced plans to curtail production at its San Ciprián aluminum smelter in Spain.

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US steel prices continue to cool

steel production

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Although U.S. steel prices remain elevated, prices have cooled over the last few months, according to MetalMiner Insights data.

U.S. hot rolled coil, for example, closed last week at $1,587 per short ton, or down 8.3% month over month. Cold rolled coil, meanwhile, fell 3.2% to $2,019 per short ton.

Hot dipped galvanized is down 2.6% to $2,050 per short ton.

However, steel plate, critical for the energy sector, has bucked the general trend, particularly amid rising oil prices in Q4 2021. U.S. steel plate is up 1.6% month over month to $1,856 per short ton.

OPEC to maintain output increases

OPEC today announced it plans to continue previously agreed upon monthly output increases of 0.4 million barrels per day for February 2022.

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This morning in metals news: steel prices continue to cool heading toward the year’s end, MetalMiner Insights data indicate; meanwhile, global crude steel production continued to decline in November; and, finally, the U.S. exported more petroleum and crude oil products than it imported in the first half of 2021.

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Steel prices cool to close the year

steel shipment

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U.S. steel prices remain elevated compared with historical levels.

However, steel prices have begun to cool over the last couple of months in 2021, MetalMiner Insights data indicate.

U.S. cold rolled coil closed last week at $2,053 per short ton, or down 2.6% month over month. However, the price remains well above the December 2019 price of just over $1,018 per short ton.

Meanwhile, U.S. hot rolled coil is down 5.7% month over month to $1,690 per short ton. The price is up from the December 2019 price of around $910 per short ton.

Global crude steel production declines

Global crude steel production fell by 9.9% year over year in November, the World Steel Association reported.

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Thyssenkrupp’s prospective plans to separate Thyssenkrupp Steel (TKS) into a standalone company indicate a plan to sell it, industry watchers said, though they questioned what kind of price the German conglomerate would ultimately receive.

“Everybody knows that it has been an exceptional year,” one trader said about steel prices and demand.

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Thyssenkrupp favors ‘stand-alone’ solution for steel unit

ThyssenKrupp

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That comment followed Thyssenkrupp’s late November announcement of plans to split Thyssenkrupp Steel (TKS) from the rest of the group.

“Thyssenkrupp is still convinced that a stand-alone solution offers the best future prospects for Steel Europe. However, spinning off the steel business is a very complex undertaking characterized by economic challenges and a large number of uncertainties. A final decision will depend on many factors, some of them external,” the conglomerate said Nov. 18, when it announced its financial results for 2020/21.

“As well as addressing the usual carve-out issues, Thyssenkrupp is currently conducting a feasibility study to explore which conditions are required to achieve a stand-alone solution for the steel business,” the group added.

TKS’ adjusted earnings before income tax (EBIT) came to €116 million ($438 million) for its 2020/21 fiscal year ending Sept. 30. That compared to a loss of €820 million ($925 million) for the previous fiscal year.

Revenues for that year totaled €8.93 billion ($10 billion), the subsidiary said on Dec. 2, up by a quarter from 2020-2021, TKS noted.

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This morning in metals news: U.S. steel capacity utilization ticked up to 82.4% last week, as steel prices continue to cool; meanwhile, Nucor Corporation announced it is expanding its production footprint by acquiring majority ownership of California Steel Industries; and, lastly, U.S. stainless steel imports declined in October.

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US steel capacity utilization hits 82.4%

steel production

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The U.S. steel capacity utilization rate rose to 82.4% for the week ending Dec. 11, the American Iron and Steel Institute reported this week.

The rate increased from 81.9% the previous week.

U.S. steel output reached 1.82 million tons last week, up 0.6% from the previous week. Meanwhile, output in the year to date is up 19.4% to 89.9 million tons.

Meanwhile, U.S. steel prices continue to cool after rising for more than a year.

U.S. hot rolled coil reached $1,731 per short ton last week, or down 6.9% month over month, according to MetalMiner Insights data. Cold rolled coil fell 1.9% to $2,086 per short ton. Hot dipped galvanized fell 4.4% to $2,105 per short ton.

Nucor to acquire California Steel Industries

In M&A news, U.S. steelmaker Nucor announced it is acquiring a majority stake in California Steel Industries.

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The Raw Steels Monthly Metals Index (MMI) dropped by 7.7% month over month to 108, as steel prices fell in November.

December 2021 Raw Steels MMI

The U.S. steel market continues to show weakness. As HRC prices endure week-over week-declines, mill lead times have narrowed to historically average ranges.

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UK, Japan, Korea seek removal of Section 232 tariffs

Following an agreement reached with the E.U., the U.K., Japan and South Korea have all requested to renegotiate the Section 232 tariffs with the U.S.

The Trump administration imposed the tariffs in 2018, levying duties of 25% and 10% on steel and aluminum imports, respectively, from most countries. In late October, the parties announced that the U.S. and E.U. had renegotiated the import restrictions in favor of a tariff-rate quota system. Under the new arrangement, the U.S. would permit a limited volume of the metals produced in the E.U. into the U.S. with no Section 232 duty applied. For steel products, the quota would total 3.3 million metric tons, effective Jan. 1, 2022.

Japan, in particular, had requested an exemption from the tariffs since their onset, instead in favor of a trade agreement in line with WTO rules. Alongside the establishment of Japan-U.S. Commercial and Industrial Partnership (JUCIP), the U.S. said in mid-November that it would open discussions with Japan about a possible ease to the current duties. This announcement prompted South Korea to officially request negotiations, as both Japan and the E.U. are major competitors to the Korean steel industry.

Meanwhile, in a joint statement released Dec. 7, the U.S. and Britain indicated they will open talks regarding the tariffs. British trade minister Anne-Marie Trevelyan has invited the U.S. Commerce Secretary, Gina Raimondo, to visit the U.K. in January, as pressure grows to raise Britain’s retaliatory tariffs on U.S. products.

Chinese daily crude output lowest since 2017

Chinese daily steel production hit a four-year low in October.

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It is always a challenge reading markets, whether you look at fundamentals of supply, demand and macro economic developments or whether you are a chartist looking at price trends to see how they compare to previous models, assessing price movement relative to Fibonacci levels and indications from high/low daily pricing data.

One issue we repeatedly see is an overreliance on one metric. The media love a headline and will make a prediction based on just one data point. Stock levels fall — prices must rise, or imports rise – so demand must be strong.

If only life were quite so simple.

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Rising imports, iron ore prices

iron ore

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More seasoned analysts understand that, and a recent Reuters post is a case in point.

Rising imports and a 25% surge in iron ore prices over just three weeks into top consumer China have been taken by many as a sure bet steel demand is strong. China buys some 70% of seaborne iron ore. As such, it is overwhelmingly the main driver of demand.

The post cites Chinese customs data from Dec. 7 that reported November iron ore imports of 104.96 million metric tons. That total is up 14.6% from October and marks the strongest month since July 2020.

That all sounds immensely bullish, and will no doubt support prices that have pulled back marginally but remain near multiweek highs at over $100 per metric ton equivalent on China’s Dalian exchange (up from the mid $80s early last month).

The market also took support from China’s politburo, promising to promote a “healthy development” of the property sector. That comes shortly after China’s central bank announced a cut in banks’ reserve requirement ratio to bolster slowing economic growth.

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This morning in metals news: steel capacity utilization fell to 81.9%; lead prices have lost ground this month; and, lastly, Liberty Steel announced the restart of its Georgetown, South Carolina plant.

During the last MetalMiner webinar of 2021, the MetalMiner team will take a look ahead and overview price predictions for 2022. To attend, sign up on the MetalMiner Events page

Steel capacity utilization rate falls to 81.9%

steel production

photollurg/Adobe Stock

The U.S. steel capacity utilization rate fell to 81.9% for the week ending Dec. 4, the American Iron and Steel Institute reported.

U.S. steel output during the week totaled 1.81 million net tons, or down 1.6% from the previous week. For the year to date, steel production totaled 88.08 million net tons, or up 19.6% year over year, at a capacity utilization rate of 81.6%.

U.S. steel prices began to backtrack in September after a year of uninterrupted rises.

Hot dipped galvanized closed last week at $2,131 per short ton, or down 3.8% month over month, according to MetalMiner Insights data.

Hot rolled coil closed last week at $1,770 per short ton, or down 6.1% month over month.

Lead prices retreat

Meanwhile, lead prices have lost ground so far this month.

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The Construction Monthly Metals Index (MMI) fell by 6.1% for this month’s reading, as U.S. construction spending rose by 7.5% year over year in the first 10 months of the year.

December 2021 Construction MMI chart

MetalMiner is hosting its final webinar of the calendar year tomorrow — Wednesday, Dec. 8 — during which the MetalMiner team will overview price predictions for 2022. To attend, visit the MetalMiner Events page

US construction spending up in October

housing starts

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U.S. construction spending came in at a seasonally adjusted annual rate of $1,598 billion in October, up 0.2% from September, according to the Census Bureau.

Furthermore, the October spending rate increased by 8.9% compared with October 2020 spending.

Through the first 10 months of the year, U.S. construction spending totaled $1,323.1 billion, or up 7.5% year over year.

Private construction spending in October reached a seasonally adjusted annual rate of $1,245.0 billion, or down 0.2% from September. Within private construction, residential construction reached a rate of $774.7 billion in October, down 0.5% from September. Nonresidential construction rose 0.2% to $470.3 billion.

Meanwhile, public construction spending rose 1.8% to a rate of $353.0 billion. Educational construction spending rose 0.2% to $82.2 billion. Highway construction spending rose 2.4% to $102.5 billion.

Nucor to build third rebar micro mill

As we reported yesterday, Nucor Corporation on Monday announced plans to build its third rebar micro mill.

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The Automotive Monthly Metals Index (MMI) dropped by 0.7% for this month’s reading.

December 2021 Automotive MMI chart

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US auto sales

Ford Motor Co. reported November U.S. sales increased by 5.9% year over year to 158,793 vehicles. Total truck sales increased by 4.6%. Meanwhile, SUV sales increased by 20.8% and electrified vehicle sales increased by 153.6%.

“Ford’s electrified vehicle sales in November grew at a rate more than three times faster than the overall electrified vehicle segment, taking Ford’s electrified vehicle share to 10 percent compared to 5.4 percent last year,” the automaker said in its November report. “This set up a record November on sales of 11,116 electrified vehicles – up 153.6 percent. New products are providing the boost, with Mustang Mach-E and F-150 Hybrid sales of 3,088 and 4,767, respectively.”

Meanwhile, Honda reported U.S. sales fell 17.1% month over month. Acura brand sales fell 21.2%, while Honda brand sales dropped 16.6%.

Hyundai reported November sales in the U.S. of 44,345 units, down 20% year over year.

“Consumer demand remains exceptionally high, and our dealers are doing a fantastic job of turning vehicles quickly and selling many before they even hit the lot,” said Randy Parker, senior vice president, national sales, Hyundai Motor America. “Lingering availability issues persisted into November, but we are optimistic that we will close the year strong.”

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