December at a Glance

Written by John Packard

The following industry data, current through the end of the month of December 2017, covers a number of important indices and drivers of steel prices, as well as supply and demand. As the month ended, the Steel Market Update (SMU) Price Momentum indicator was referencing higher flat rolled steel prices over the next 30 to 60 days. The domestic steel mills were raising prices into the New Year and are expected to continue to push for higher prices now that we are in calendar year 2018.

Our SMU Steel Buyers Sentiment Index jumped during the month of December and our Current Sentiment Index was close to an all-time high at +73, with Future Sentiment following closely behind (+72.5). Based on a three-month moving average, Current Sentiment rose to +65.50.

Benchmark hot rolled ended the month at $640 per ton and for the entire month averaged $634 per ton. Our average was slightly higher than the CME HRC Futures settlement price, which was $629 per ton. We were slightly lower than Platts, which averaged $642 for the month of December.

Ferrous scrap prices rallied in December and are expected to rally again as we move into January negotiations. Many times scrap is a harbinger of what steel buyers can expect moving forward (in this case, higher prices as we head into January).

Zinc and aluminum spot prices on the LME continue to be at historically high levels (over the past five years).

Iron ore prices have rallied in China and ended the month of December at $73.30/DMT, according to The Steel Index.

One area of concern that bears watching closely is the “Apparent Excess” of flat rolled inventories at the domestic (U.S.) service centers. Our SMU proprietary analysis of MSCI data had distributors growing invnetories as of the end of November. Later this month, we will be able to do an analysis of the end of December numbers. However, prior that we will conduct our own survey of service centers who have been reporting inventories to SMU over the past five months to see what changes are occuring. We hope to have our “flash” report done by the end of this week and our full survey completed by the 12th of January.

Many of the data items shown below are optimistic and should represent a good start to 2018.

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