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Morning Ferrous Markets

By: Spencer Johnson, Risk Management Consultant

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Morning Ferrous Markets

Spencer Johnson

Risk Management Consultant

+1 212-379-5492

spencer.johnson@stonex.com

Jay Horton

Base Metals Sales

+1 212-379-5553

john.horton@stonex.com

Market Overview

In June, the ISM Manufacturing Index decreased slightly to 48.5% from May's 48.7%, falling below the expected 49.1%. The New Orders Index rose to 49.3%, while the Production Index fell to 48.5%, reflecting ongoing challenges in industrial markets. US non-residential construction spending remained flat month-over-month (M/M) but decelerated to 6% year-over-year (Y/Y). Residential construction spending also remained flat M/M, growing 7% Y/Y. Meanwhile, political changes in the UK and France have introduced uncertainty. In the UK, Labour's victory and the rise of smaller parties suggest a fragmented political landscape. In France, a far-left coalition's surprise win has led to market volatility, though bonds remain stable.

US HRC Steel Futures were priced at $664.00 USD as of July 8, 2024, reflecting a 1.63% daily decline. Benchmark HRC prices fell to $665/st from $670/st (SMU) and $665/st from $675/st (Platts). Nucor's Consumer Spot Price dropped to $670/st from $680/st, while Cleveland-Cliffs's monthly spot price fell to $720/st from $800/st. Lead times increased slightly, and Nucor cut its plate price for August to $1,075/st. The LME Turkish steel scrap market saw steady prices, with the LME Steel Scrap CFR Turkey at $390.50 per tonne and LME Steel Rebar FOB Turkey at $590 per tonne. Iron ore futures continued to drop, with Chinese port inventories rising to a two-year high and global shipments decreasing. Despite high shipment levels, maintenance-related production declines and seasonal demand concerns contributed to market volatility. Chinese iron ore inventory stood at 146.04 million tonnes, with steel inventory at 12.84 million tonnes.

Upcoming Data Releases

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North American (US) HRC Steel Market

As of July 8, 2024, the US HRC Steel Futures market was priced at $664.00 USD, with a daily decline of $11.00 or -1.63%, underscoring ongoing market volatility. Steel Index (SMU) reports a week-over-week drop in HRC to $665/st from $670/st, while Platts observed a decrease to $665/st from $675/st. Similarly, Nucor's Consumer Spot Price (CSP) fell to $670/st from $680/st, and Cleveland-Cliffs's monthly HRC spot price significantly dropped to $720/st from $800/st.

Market performance metrics indicate a 1.63% drop over the past five days, with a one-month decline of 1.04%, a three-month fall of 8.79%, and a substantial year-to-date reduction of 41.50%. The annual performance also shows a decrease of 29.14%, reflecting the broader market pressures.

In terms of supply dynamics, SMU noted an increase in lead times for HRC, rising to 4.7 weeks from 4.6 weeks, while Platts tracked a rise to 4.9 weeks from 4.5 weeks, suggesting a tightening but still normal supply situation. In a strategic pricing adjustment, Nucor cut its plate price for the August order book to $1,075/st from $1,200/st, a move anticipated by market conditions where most deals were reportedly already below this new price point. Platts also reported a current plate price of $1,040/st, reflecting competitive adjustments to remain aligned with market activity and import levels.

Overall, the US HRC Steel Futures market continues to adjust to fluctuating demand and supply, with price movements and strategic adjustments by major players responding to the dynamic market conditions.

HRC Front Month 3 Day Trend

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StoneX & Bloomberg

HRC Front Month 6 Month Price Trend

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StoneX & Bloomberg

Chinese Steel & Iron Ore Markets

Last week, China’s total steel inventories were flat week-over-week (WoW) but up 11% year-over-year (YoY) at 18 million tonnes (Mt). China's steel inventories are tracking in line with the average for this time of year, although inventories have remained flat since the start of May. Typical seasonality would suggest that de-stocking will cease in Q3. Mysteel reports that Chinese domestic demand for steel products last week was flat WoW and down 3% compared to the same week in June 2023.

The main contract for iron ore closed at 825.5 yuan/mt, marking a 3.34% decrease for the day. Market activity was subdued as some traders were reluctant to sell, while steel mills made few inquiries and purchased only as needed. At Shandong port, PBF traded between 820 and 825 yuan/mt, a decrease of 10 to 20 yuan/mt from last Friday. Similarly, at Tangshan port, PBF traded at 835 yuan/mt, a decrease of 15 to 20 yuan/mt from the previous Friday.

Global iron ore shipments last week totaled 34.32 million tons, a 2.3% decrease from the previous week, with both Australia and Brazil experiencing declines in shipments. The total amount of iron ore arriving at China's ports was 24 million tons, down 6.03% from the previous month. Despite high shipment and arrival levels, molten iron production is estimated to slightly decline due to blast furnace maintenance, potentially leading to an accumulation of iron ore inventory.

Concerns about terminal demand persist due to the off-season, contributing to a significant market decline. However, upcoming important meetings may support mining prices, making it unlikely to see a short-term downward trend and leading to continued market fluctuations. Iron ore inventory at Chinese ports stood at 146.04 million tonnes, an increase of 0.03 million tonnes (0.27%). Steel inventory in China was 12.84 million tonnes, up by 20 yuan (0.54%).

SGX Iron Ore CFR China (62%) Futures

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StoneX & Bloomberg

European Steel and Steel Scrap Markets

In the LME Turkish steel scrap market, prices remained steady across various steel scrap commodities, including #1 HMS, Cast Iron Scrap, Grade 1 Old Steel, Grade 2 Old Steel, Grade OA Structural Plate, Sheet Metal, Shredded Auto Scrap, and Structural Steel, compared to the previous week. Specifically, the LME Steel Scrap CFR Turkey (Platts) Month 2 Closing price as of July 4, 2024, was $390.50 per tonne. The LME Steel Rebar FOB Turkey (Platts) Month 2 Contract saw a slight increase, closing at $590 per tonne, higher than the previous week's $581.50 per tonne. Additionally, the LME Steel Scrap CFR India (Platts) Month 2 prices closed at $426.50 per tonne on July 4, 2024.

Examining the technical indicators for LME Steel Scrap CFR futures, the last price was $392. The exponential moving averages (EMA) were as follows: EMA4 at $393, EMA9 at $392, and EMA18 at $392. The Directional Movement Index (DMI) showed values of DI+ at 23.4 and DI- at 44.8, with an Average Directional Index (ADX) of 15.6, indicating a weak trend.

The last interval price was $400, and the 30-day volume was 386, with a 60-day range of 8.2. The 1-year high and low prices were $403 and $385, respectively. The Moving Average Convergence Divergence (MACD) Line 1 was -0.2, and the MACD Line 2 was 0.3. The 20-day moving average was $392, the 50-day moving average was below the 200-day moving average (indicating a bearish trend), and the 200-day moving average was $393.3. The Relative Strength Index (RSI) over 14 days was 49.50, suggesting a neutral market position. The support level was at $396.04, and the resistance level was at $400.3. The Open Interest (OI) was 461, and the volume was 24.

Turkish Scrap 1st Month Futures

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StoneX & Bloomberg

Current Prices

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StoneX & Bloomberg

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