Economy

March Was an Interesting Month

April 2, 2014

The month of March proved to be an interesting month for the flat rolled steel industry and related commodities associated with the industry, both within North America and around the world.

The biggest news was the move by the domestic mills to raise flat rolled steel prices. ArcelorMittal led the way on March 17th when they announced specific minimum base prices: hot rolled = $33.00/cwt base and cold rolled and coated were $39.50/cwt base. The rest of the domestic steel mills followed with either the exact same base pricing or they announced a $40 per ton increase. Either way the target numbers are $660 HRC and $790 base CR and coated flat rolled steels.

In Canada the base prices are a little higher due to the lower value of the Canadian dollar vs. the U.S. dollar. Dofasco announced base prices (in Canadian dollars) of: hot rolled = $36.50/cwt, cold rolled and galvanized = $43.50/cwt and Galvalume = $44.00/cwt.

As we move into April, Steel Market Update has our Price Momentum Indicator pointing toward higher prices.

Higher steel prices will be aided by two factors: steel mill production problems and higher scrap costs.

On Thursday evening, March 27th US Steel lost the steel making operations at their Great Lakes facility in Michigan. At the time of this writing the mill was still not producing steel, losing approximately 11,000 tons of new steel production per day. This comes after AK Steel lost their furnace at Ashland for awhile and the combination of the two has helped to tighten up the market, moving momentum from Neutral to Higher during the month of March.

We saw scrap prices drop at the beginning of the month from February levels. With the cold winter and restricted scrap flows it is normal for scrap prices to rise during the winter months. That has not been the case this year due to a lack of exports to Turkey. Scrap normally destined to move off the east coast flowed into the Mid-Atlantic and Midwestern states instead depressing prices. Scrap prices (Midwest – Chicago Area) were lower by approximately $15 per gross ton.

As we move into the month of April scrap prices are projected to rebound by approximately $20 per gross ton. This will be one of the keys to watch in the early portion of the month.

Across the pond (Pacific Ocean) spot iron ore prices had a wild ride during the month of March. March iron ore prices closed the month out strong with the biggest one-day price increase seen in the last six months—a 4% price increase from 112.3/dmt on March 28th to 116.8 on March 31st for 62% Fe according to the TSI Index. March has proven to be a tumultuous month with a nearly 12% price change from the mid-March plunge prices of 104.7/dmt for 62% Fe and 95.1/dmt for 52% Fe on March 10th according to the TSI Index. The price increase is due to speculation of China precipitating its construction projects. According to Reuters, “China’s Vice Premier Zhang Gaoli called for faster construction of certain important projects on Tuesday, in remarks that may feed speculation that China will increase state spending in coming months to bolster its stuttering economy.”

Enjoy this the 9th issue of our Monthly publication.