January Announcements Reflect More Strength for Steel Prices

 |  Includes: AKS, NUE, WUHN
by: Michelle Galanter Applebaum
The Advance/Decliner Index is our effort to quantify the anecdotal price information we find in our every day reading about global steel price trends. We also are looking at relative prices in the U.S. versus abroad in our attempt to gauge international price pressure/opportunities heading our way.
Advance/Decliner Index Climbs. Our Advance/Decliner Index reversed last
week’s losses, rising to 73% from 67%. Included in this week’s price increases were several January hikes announced by price leaders in the U.S. and China. Nucor (NYSE:NUE) announced multiple price hikes while AK Steel (NYSE:AKS), Wuhan (NASDAQ:WUHN), and Baosteel raised prices as well. Our China index made a small comeback on these price announcements, rising to 69% after dropping from 100% to 64% the prior week. While China still had several price cuts this week, they were very small in comparison to the price increases so we continue to see price strength in China.
Strength Most Pronounced in Flat-Rolled and Bar. China recorded nine price increases this week, while the US and Korea each posted seven. Asia had four price increases, followed by Saudi Arabia with three, Turkey with two and Italy, the Ukraine, the CIS, Taiwan, and the UK each posting a single price hike. China and Turkey each had four price cuts, while Japan, Russia, Saudi Arabia, Egypt, Vietnam and the CIS each had one price decline this week.
There were 14 price increases for flat-rolled products, followed by rebar with six, pipe with four, plate and semi-finished steel each had three, beam, electrical, and merchant bar each had two, and wire rod reported a single price rise. Flat-rolled products recorded eight price cuts, while rebar had three, plate had two, and beam had one price decline.
Relative Domestic Prices Still Lower in December. The good news in the US market continues to be the remarkably low level of domestic prices versus the rest of the world driven by a weaker economy in the US as compared to other regions, particularly China.
Rebar prices in the US in December have fallen $46/ton, or 10% from November, and are down still more sharply relative to all other regions where prices have risen. At roughly $425/ton, rebar prices are now significantly lower than both China and Europe for the first time since 2004. Because the US is generally the world’s largest importer, lower prices in the US than other regions have never been sustainable for more than a month or two at a time, so the likelihood of rising rebar prices in the US is quite high.
Plate prices have fallen 7% in December and are down relative to China and Europe where plate prices have risen 4% and declined 2%, respectively. Absolute HRC prices in the US have risen so far in the month, and are relatively flat versus China and Japan where prices have also increased. Domestic beam prices increased by $25/ton or 4.0% in December and are up relative to China, Japan, and Europe which have posted increases of 1.7%, 1.2%, and a decrease of 3.2%, respectively.
Outlook. Global steel prices are rising in what we view as an increasingly volatile pricing environment. The combination of bare-bones inventories in most of the world with occasional – and mostly nominal - demand upticks is likely to bring us to a permanent “new normal” of oscillating steel prices in cycles far shorter than what we’ve seen in the past. In China, higher raw material costs and stronger demand is driving the surge. With record production levels finally starting to ease – November average daily production was down 5% - we expect to see continued strength in Chinese prices.
Disclosure: No Positions.