Raw Steels MMI: US steel prices invert, continue to climb

2022-06-19 01:32:09 By : Ms. Jessica yang

The Raw Steels Monthly Metals Index (MMI) increased by 15.14% month over month, as U.S. steel prices picked up this past month.

U.S. steel prices rose in March.

Plate prices skipped the price descent and climbed to new all-time highs.

Meanwhile, HRC, CRC and HDG hit a bottom in early March and continue to rise.

Know what to do when the market shifts. Make sure you’re familiar with the art of timing your buy.

Thus far, Ukrainian forces appear to have foiled Russia’s plan of a quick victory over the neighboring region.

According to a senior defense official, around two-thirds of Russian forces retreated from Kyiv as Russia proved unable to successfully manage military operations on multiple fronts. While the retreat suggests a minor victory for Ukraine, it’s far from a signal the conflict will end any time soon.

Instead, the official stated that the troops will likely “be refit, resupplied, perhaps maybe even reinforced with additional manpower, and sent back into Ukraine to continue fighting elsewhere.” As Russia’s focus shifts to the Donbas region of Ukraine, the potential for a prolonged, more conventional war appears increasingly likely.

As such, supply constraints and the war’s other impacts on commodities, including steel, will continue as well.

European steel prices have jumped to new record highs. On top of the disruption of imports of Ukrainian steel, the E.U. banned imports of Russian steel products as part of a growing list of sanctions against the invading country.

Russia and Ukraine account for roughly one-fifth of steel imports to Europe, Bloomberg reported. Surging energy prices — due, in part, to the war — also caused numerous steelmakers on the continent to curtail production. The cumulative effect translates to an ever-tightening global steel market that, in addition to those in Europe, continues to push up global steel prices.

MetalMiner’s free weekly newsletter provides up-to-date metal price intelligence, including recent coverage of the impact of the war in Ukraine on metal prices.

Prior to the U.S. steel price inversion, MetalMiner examined the potential points of domestic market exposure to the ongoing conflict between Russia and Ukraine. Specifically, the fact that Russia and Ukraine account for more than 60% of U.S. pig iron supply.

According to the CEO of Stelco, however, while Russia and Ukraine were the leading sources of pig iron supply, they are far from the only options.

In a Wall Street Journal opinion piece, Alan Kestenbaum makes the case for steel sanctions against Russia. Of particular note, he mentions his own Ontario-based company Stelco has a remaining 90% plus of its 1 million tons of annual pig iron capacity available for use.

Beyond that, hot briquetted iron (HBI) stands as a pig iron substitute. Cleveland-Cliffs recently commissioned a new plant in Toledo. The facility started production last June. It boasts an annual capacity of 1.9 million metric tons of natural gas-based hot briquetted iron.

Pig iron is among multiple pressure points for the U.S. steel sector due to the ongoing conflict. However, it is likely not the primary driver of the current price ascent.

Meanwhile, U.S. automotive production continues to be stunted by the semiconductor shortage. The war in Ukraine has exacerbated the problem.

AutoForecast Solutions recently trimmed its expectations for North American auto output from its original estimate of 15.3 million vehicles. Due to ongoing shortages, automakers will produce at least 16,000 fewer vehicles, with a total of 300,000 still at risk. As steel makes up around 54% of the average vehicle, according to the American Iron and Steel Institute, 300,000 vehicles would amount to roughly 220,000 short tons of flat-rolled steel.

Stellantis, Ford, and GM all recently announced production cuts, citing semiconductor and parts shortages.

In spite of the cuts, GM remains optimistic that total production during 2022 will still outpace that of 2021. The company currently estimates total production in 2022 will reach 15.15 million vehicles compared to 13.14 million in 2021.

Although 2022 will not see a substantial uptick in steel demand from the auto sector, HDG prices continue to see upside pressure due to historically high zinc prices. Zinc prices reached a new all-time high in early April.

Soaring energy costs substantially curtailed smelting for the galvanizing metal across Europe. While Europe’s energy crisis predated Russia’s invasion, the conflict nonetheless worsened it.

European smelting company Nystar noted, “it is not economically feasible to operate any of our sites at full capacity.” While under normal conditions the company boasts a capacity of 720,000 tons per year, it now anticipates “total production cuts of up to 50%.” Nystar is hardly alone within the region which, as a whole, accounts for roughly 16% of global refined zinc output.

Europe’s mounting troubles continue to narrow the expected surplus for 2022, which follows a 194,000-ton deficit in 2021, according to the International Lead and Zinc Study Group (ILZSG). Furthermore, LME warehouse inventories of zinc continue to dwindle.

The market will experience further tightness, as major traders like Trafigura move to take substantial quantities of the metal out of warehouses. SHFE inventories climbed throughout the year. However, logistics issues in China will hinder any relief that those stocks could provide.

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Chinese slab prices rose by 1.36% month over month to $807.66 per metric ton as of April 1. Meanwhile, the Chinese billet price increased by 5.97% to $763.84 per metric ton.

Chinese coking coal prices fell by 2.22% to $502.79 metric ton.

U.S. three-month HRC futures rose by 27.39% to $1,530 per short ton. Meanwhile, the spot price increased by 24.78% to $1,405 from $1,126 per short ton. U.S. shredded scrap steel prices rose by 26.35% to $609 per short ton.

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