Steel Prices Fall but Continue Strong

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 |  Includes: AKS, BHP, CLF, CMC, GGB, GNA, MT, NUE, RIO, RS, SCHN, SMSMY, STLD, VALE, WOR, X, ZEUS
by: Michelle Galanter Applebaum

Advance/Decliner Index Has Slight Pullback. Our Advance/Decliner Index fell to 88% from 94% last week, marking the sixth consecutive week above 80%, with continued strength mainly outside of China. Our China index came in at 50% as pricing weakness persists due to concerns about tight credit and high inventories as well as a slight pullback in spot iron ore prices in the last two weeks. We expect low volumes heading into the Chinese New Year will keep prices down before climbing back up as demand strength returns after the holiday.

European Prices Surge; Flat-Rolled Posts Another Strong Week. The UK and Europe each posted five price increases this week, followed by China and Korea with four, while Japan, the Ukraine, and the US had three increases apiece. The CIS, Taiwan, and Vietnam had two price hikes each, while Southeast Asia, the Middle East, Malaysia, Thailand, Canada, Russia, Turkey, Iran, and the UAE posted one price increase apiece. China had four price decreases while India recorded two price drops. There were eleven price increases for flat-rolled products, followed by rebar with eight, billet, pipe, and wire rod with five, while plate and beam had four price hikes. Flat-rolled products posted three price cuts, followed by billet with two, and beam with one decline.

Relative Domestic Prices Finish Strong in January. US prices continue to move up with particular strength in plate and rebar. US rebar prices are up 11% from December and have posted increases – off of near-record lows - relative to China and Europe where prices have increased modestly, and versus Japan where prices have fallen 6%. Plate prices rose 16% in January, and are up significantly relative to China and Europe where prices are nearly unchanged from December. Absolute HRC prices in the US have are up 8% for the month, and are up relative to China and Europe, and up sharply relative to Japan. Domestic beam prices ended January up 5.6% and are up relative to China where prices have risen 2% and up relative to Europe where prices are flat and Japan where prices are down 5%.

Outlook. With the exception of China, global prices continue to rise on high raw material costs, low inventories, and improving demand outlook. We think prices will begin to rise again in China when demand returns following the February holiday.

Disclosure: N/A