By Raul de Frutos
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MetalMiner’s monthly Raw Steels MMI® – tracking finished steel and raw material prices across global markets – rose to a reading of 87 in January, an increase of 2.3 percent from December. Higher prices of iron ore, scrap and a 3.3 percent rise in Chinese slab kept the index moving up.
On the other hand, flat-rolled products haven’t experienced big movements during the month of December. Prices are in a bull market since June of this year, and this uptrend is still in force, but losing buying momentum. This loss of momentum makes us wonder how long this trend will last.
What to Watch For in 2014:
Strong momentum in the auto sector has been a key factor in supporting prices of US flat-rolled steel products and, as my colleague Lisa Reisman wrote recently, “Automotive demand will likely remain solid at least through the first half of 2014.” Also, a recovery in the US construction markets would contribute to domestic and global steel demand.
In regards to China, surveys show that growth in the country’s services industries slowed last month, confirming a loss of steam from the largest producer and consumer of steel. The HSBC/Markit Economics services Purchasing Managers’ Index (PMI) declined to 50.9 in December, the lowest level since August 2011. The success of the Chinese government in rebalancing its economy will be a factor to watch in 2014.
The sustainability of higher steel prices in 2014 will continue to depend on 1) the improvement in demand across regions, 2) no further deterioration of the eurozone debt crisis, and 3) higher raw material prices.
What This Means for Metal Buyers
Steel prices are finding support. On the other hand, a steady yet not strong uptrend makes us think about a possible top in prices in the short term. Buyers may want to take note of this before taking long positions.
Key Price Drivers
On the LME, the 3-month price of steel billet climbed 18.8 percent, settling at $285.00 per metric ton. The price of US shredded scrap rose 6.5 percent over the past month, the second straight month of gains. The price of Chinese coking coal finished the month 2.9 percent higher.
For the second month in a row, the price of Chinese slab increased, rising 2.6 percent. Korean pig iron recorded a 1.6 percent increase. The spot price of the US HRC futures contract saw its value rise 1.4 percent to $675.00 per short ton.
Korean steel scrap prices fell 7.0 percent after rising the previous month. The 3-month price of the US HRC futures contract dropped 2.9 percent to $633.00 per short ton. Meanwhile, Chinese billet did not budge the entire month.