uploads///part  chinese global steel prices

No Early Respite for US Steel Producers as Prices Tank Globally


Nov. 26 2015, Updated 10:06 a.m. ET

US steel producers

As we’ve already seen, spot steel prices in the United States have now reached their 2009 lows. Apparently, steel’s performance has been much worse compared to other metals (DBB), including aluminum and copper. Although copper and aluminum have corrected, they’re still much above their 2009 lows.

Chinese steel prices have continued to slide in November, as you can see in the above graph. According to ArcelorMittal (MT), citing a CISA (China Iron and Steel Association) report, Chinese steel mills lost $35 per ton on average in 3Q15. However, Chinese steel production and exports have still not fallen much. Higher Chinese steel exports have negatively impacted steel companies, including POSCO (PKX), Gerdau SA (GGB), and Ternium (TX).

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Global steel prices

While copper, aluminum, and other base metals have benchmark pricing determined by trading on the LME (London Metal Exchange), steel prices are more regional in nature. The difference between steel prices in various regions is a key driver of global steel trade. Historically, US steel prices have been higher compared to other countries, including China. This has made the United States the top steel import destination.

Trade cases

Steel companies have filed a series of trade cases this year. Companies were expecting that steel prices in the United States might rise if they win these trade cases. However, looking at the prevailing steel market conditions, even some positive traction on trade cases might also prove to be too little too late. There might be some positive movement in steel prices if steel companies win some trade cases, but a sustained recovery in steel prices looks distant.

Low global steel prices would keep a lid on US steel prices as well. Even if US steel companies manage to get duties imposed on some countries, imports might rise from other countries. A similar thing happened in OCTG (oil country tubular goods), where Korean exports to the United States jumped after anti-dumping duty was imposed on Chinese products.

In the next part, we’ll discuss why steel prices could stay lower for longer.


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