Steel

U.S. steel imports totaled an estimated 2.5 million metric tons in August, the Census Bureau reported Friday, as U.S. steel prices continue to post gains.

The August total marked a decline from 2.7 million metric tons in July.

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Steel imports slow in August but remain up in year to date

steelmaking in an EAF

nikitos77/Adobe Stock

Despite the decline in U.S. steel imports from July to August, imports in the year to date remain up from last year.

Through July, U.S. steel imports totaled 16.2 million metric tons, up from 13.7 million metric tons for the same period in 2020.

Imports of blooms, billets and slabs fell from 902,920 metric tons in July to 602,114 metric tons in August. Imports of oil country goods fell from 162,509 metric tons to 106,650 metric tons.

Meanwhile, imports of cold-rolled sheets fell from 157,524 metric tons to 147,330 metric tons.

Wire rod imports also fell from 101,768 metric tons to 79,203 metric tons.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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Week of Sept. 20-24 (China’s property market and steel prices, global copper mine production and much more)

Chinese steel factory

fanjianhua/Adobe Stock

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Anyone following the financial papers cannot have failed to read lurid reports regarding China’s Evergrande construction company, which appears on the brink of collapse.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Chinese markets fall on Evergrande crisis

Indeed, stock markets in China took a heavy fall this week on news that the world’s most indebted construction firm could fail to repay interest coupons due this week and next.

Evergrande was valued at $41 billion in 2020. However, its market capitalization fell to just $3.7 billion now, as it became apparent the highly leveraged company with total liabilities of some $300 billion was struggling to repay a modest onshore interest debt this week.

Evergrande’s woes are merely the symptom of a much bigger problem.

As the Financial Times notes, China’s vast real estate sector, which contributes some 29% of the country’s gross domestic product, is so overbuilt that rather than leading as China’s prime driver of economic growth, it is fast becoming a drag on it.

According to the Financial Times, there is enough empty property in China to house over 90 million people. To put that in perspective, there are five G7 countries – France, Germany, Italy, the U.K. and Canada — that could fit their entire populations into those empty Chinese apartments, with room to spare.

Oversupply has been a problem for several years. But after much prevarication, President Xi Jinping has formulated three red lines to reduce debt levels in the sector. While by no means the only perpetrator, Evergrande has failed all three red lines. Those lines are the ratio of liabilities to assets, of net debt to equity, and cash to short-term debt.

However, it is simply the first and largest to be thrown to the wolves as an example to the rest.

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The U.S. steel capacity utilization rate fell slightly but remained at a healthy 84.9% for the week ending Sept. 18, the American Iron and Steel Institute reported this week.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Steel capacity utilization hits 84.9%

hot-rolled coil steel

taitai6769/Adobe Stock

U.S. steel capacity utilization last week fell to 84.9%, down from 85.3% the previous week. However, the rate remains up significantly from the 68.6% during the same week in 2020.

U.S. steel output last week totaled 1.87 million net tons. The total marked a 0.4% decline from the previous week.

However, steel output increased by 21.9% on a year-over-year basis.

For the year to date, production totaled 67.66 million net tons, AISI reported. Meanwhile, steel capacity utilization during the period reached 80.9%.

Production in the year to date is up 20.2% from the same period last year, when the capacity utilization rate reached 66.8%.

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Chinese moves to clean up their heavy-polluting industrial sector has triggered a swift collapse in iron ore prices for the first time since July 2020.

Prices last Friday and Monday dipped below the $100 per ton mark.

iron ore stockpile

John/Adobe Stock

According to a draft guideline released on Thursday, the Ministry of Ecology and Environment intends to monitor 64 regions during its winter air pollution campaign.

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Evergrande crisis sparks concerns over Chinese economy

Iron ore, copper and other commodities may be further hammered following news of the crisis at Chinese developer Evergrande. Markets across the globe fell sharply Monday as Evergrande, one of the biggest property developers in the country, Evergrande threatened to default on loans worth U.S. $300 billion.

This has sparked off worries about the economy. It could also cause downturns in construction and demand for raw materials.

Iron ore’s fall

Since May, iron ore prices have fallen by more than half. China, the world’s biggest steelmaker, has tightened production curbs. Furthermore, China’s property market is experiencing a sharp downturn.

MetalMiner has previously reported on China’s move to cut down its steel production to curb pollution.

The Chinese government has announced plans to scale down the steel industry, which accounts for between 10-20% of its carbon emissions. The country has also raised tariffs on steel-related exports, effective as of Aug. 1, 2021.

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The Construction Monthly Metals Index (MMI) picked up by 4.9% for this month’s reading.

September 2021 Construction MMI chart

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US construction spending

U.S. construction spending reached a seasonally adjusted annual rate of $1,568.8 billion in July, the Census Bureau reported earlier this month.

The July rate marked a 0.3% increase from the previous month. Furthermore, the July figure jumped by 9.0% compared with July 2020.

During the first seven months of the year, construction spending totaled $883.2 billion, up 6.2% year over year.

Private construction spending reached a rate of $1,231.0 billion, or up 0.3%. Within private construction, residential construction reached an annual rate of $773.0 billion in July, up 0.5% from June. Nonresidential construction came in at $458.0 billion in July, or down 0.2%.

Meanwhile, public construction reached $337.8 billion, up 0.7%. Educational construction checked in at $79.7 billion, down 0.5%. Highway construction rose by 1.9% to a rate of $94.5 billion.

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The Raw Steels Monthly Metals Index (MMI) dropped by 1.4%, as Chinese steel and U.S. scrap prices declined.

September 2021 Raw Steels MMI chart

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Chinese steel merger to form third-largest steel producer

Chinese steel factory

fanjianhua/Adobe Stock

On Aug. 20, Chinese steelmakers Ansteel Group and Ben Gang formally began the process of merging their operations. If the process is completed, this will create the world’s third-largest steelmaker, behind China Baowu Group and ArcelorMittal.

Since both companies are state-owned, there will be no money changed in the transaction. Instead, the merger will be a government-backed restructuring in an effort to consolidate production in China’s bloated steel sector. Ansteel will be taking a 51% stake in Ben Gang.

The merged entity will keep the Ansteel name. Its annual production capacity will reach 63 million metric tons of crude steel.

US imports rise

Preliminary reports from the U.S. Census Bureau indicate steel imports rose for a second consecutive month.

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Higher stock levels and summer holidays have seen prices for hot rolled coil in Western Europe move off since late July, industry watchers said.

“I have the impression that people are not fully back yet from their holidays,” one source said.

Those who have returned are now either taking a wait-and-see approach to any new buying or are purchasing only small amounts, the source added.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Hot rolled coil slides in Western Europe

hot-rolled coil steel

taitai6769/Adobe Stock

Offers on hot rolled coil prices produced in Western Europe are now about €1,150 ($1,350) per metric ton exw for December delivery. That marked a drop of 4.2% from the €1,200 ($1,410) in July.

Prices for cold rolled coil, a downstream product of hot rolled coil, normally carry a premium of €100-120 ($120-140) per metric ton.

Import offers on hot rolled coil from the Far East are now about €1,000 ($1,175) per ton cfr European ports, sources also said.

Another trader reported he had heard of offers from South Korea at €960 ($1,130) per metric ton cfr Antwerp.

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Global crude steel production fell month over month for the second straight month in July, the World Steel Association reported this week.

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Global crude steel production drops

China steel production

Zhao Jiankang/AdobeStock

Global crude steel production totaled 161.7 million metric tons in July, the World Steel Association reported.

The total marked a decline from 168 million metric tons in June. Furthermore, production totaled 175 million metric tons in May.

Meanwhile, July production jumped 3.3% on a year-over-year basis.

Chinese steel production curbs take hold

Beijing’s efforts to curb steel production might not have been particularly successful during the first half of the year, as Chinese steel production surged. Chinese steel production from January through June totaled 563.3 million tons, or up 11.8% year over year.

However, the country’s steel output has declined in each of the last two months.

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U.S. steel imports totaled 2.7 million metric tons in July, the Census Bureau reported this week.

The total marked an increase from 2.6 million metric tons in June.

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US steel imports paced by blooms, billets and slabs

steel made in an EAF

nikitos77/Adobe Stock

The July rise in imports came largely on the back of a jump in imports of blooms, billets and slabs.

Imports for that category totaled 860,790 tons, up 8.2% from 795,863 tons in June.

Meanwhile, imports of hot dipped galvanized sheets and strips totaled 228,981 tons in July, up from 177,925 tons the previous month.

Imports of oil country goods rose to 160,025 tons from 154,073 tons the previous month.

Rebar, hot rolled sheet imports decline

However, imports of reinforcing bars fell to 82,623 tons from 94,915 tons the previous month.

Hot rolled sheet imports totaled 282,605 tons in July, down from 311,461 tons the previous month.

Wire rod imports fell to 101,746 tons from 113,408 tons in June.

North of the border

By country, imports from Canada increased to 594,500 from tons in July from 579,405 tons the previous month.

Meanwhile, imports from Mexico fell 7.9% month over month to 349,343 tons.

Imports from Russia surged by 30.5% to 210,540 tons.

Elsewhere, imports from Japan plunged to 60,924 tons in July from 126,982 tons in June. Korean imports jumped to 265,573 tons from 248,582 tons the previous month.

In addition, imports from Brazil surged by 34.8% month over month to 413,306 tons in July.

Steel Dynamics eyes Q4 for new flat rolled mill

Steel buyers continue to face myriad challenges, from market tightness to logistics issues.

Global steel production declined for the second straight month on a month-over-month basis in July, the World Steel Association reported this week.

Global steel production totaled 161.7 million tons in July, down from 168 million tons the previous month. Meanwhile, May production totaled 175 million tons.

Furthermore, Beijing’s efforts to curb steel production appear to be taking hold. China’s steel production also declined for a second straight month, totaling 86.8 million tons in July (down from 93.9 million tons in June.

In the U.S., buyers are vying for limited supply, whether domestically or in the form of steel imports, amid an unprecedented ascent of steel prices over the last year.

Some relief is coming in the form of Steel Dynamics, Inc.’s (SDI) new electric arc furnace (EAF) flat rolled mill in Sinton, Texas. In its Q2 investor report, the steelmaker said it plans to start production at the mill in mid-Q4 2021. The company estimated an investment price tag of $1.9 billion for the new mill.

SDI estimates the mill will add 3 million tons in annual production, bringing its total annual capacity to nearly 14 million tons.

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

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