The global metals market is complex and ever-changing. Prices fluctuate based on a variety of factors, including supply and demand, economic conditions, and geopolitical events. Today, we’re taking a deep dive into the current state of four key metals: scrap, iron ore, coking coal, and zinc.
Scrap Steel Prices Tumble
The scrap steel market has taken a significant hit in recent months. After a strong showing in early 2024, prices have fallen steadily, with prime scrap dropping a substantial $90/gt over the past two months. This decline can be attributed to a confluence of factors:
- Lower Finished Steel Prices: The price of finished steel products, which are directly linked to scrap prices, has softened in recent months. This decrease in demand for finished steel translates to lower demand for scrap, the raw material used to produce it.
- Canceled Orders and Mill Outages: Steel mills have been grappling with canceled orders and scheduled outages, further dampening demand for scrap.
- Waning Domestic Demand: The domestic steel market has shown signs of slowing down, leading to a decrease in scrap consumption.
- Limited Export Competition: Export markets for scrap haven’t offered much relief, with competition keeping prices stagnant.
Shredded scrap pricing has fared slightly better than prime scrap, but the overall trend is still downward. The current $10/gt premium for prime over shredded scrap is the tightest spread since October 2023, indicating a shift in the market dynamics.
Case Study: The Impact of Lower Scrap Prices on Steel Mills
Steel mills rely heavily on a steady supply of scrap metal at competitive prices. The recent drop in scrap prices has provided some short-term relief for mill operators. However, lower scrap prices can also lead to a decrease in overall scrap availability as fewer players are incentivized to collect and process scrap. This delicate balance between price and availability is a challenge that steel mills need to navigate carefully.
Iron Ore Prices Hit Seven-Month Low
The iron ore market is mirroring the woes of the scrap steel market. Spot iron ore prices have been on a downward spiral for the past seven weeks, reaching a seven-month low of 107.80/mt in April
Spot iron ore pricing ended the week at $107.80/mt, down significantly from $117.35/mt a week ago.
Coking Coal Prices Slide in Tandem with Iron Ore
Coking coal, another crucial steelmaking ingredient, has followed a similar trajectory to iron ore. Prices have been falling for nine consecutive weeks, reaching a low of $270.00/mt in April. This decline mirrors the oversupply situation and weak construction activity in China.
- Oversupply: An oversupply of coking coal in the global market is putting downward pressure on prices. This is due to a combination of factors, including increased production capacity and lower demand from China.
- Weak Construction Activity: The slowdown in China’s construction sector has significantly reduced demand for coking coal, a key raw material used in steel production.
The price of coking coal has fallen by more than 11% week-over-week and is now at its lowest point since September 2023.
Zinc Prices Buck the Trend with a Strong Rebound
While global zinc inventory has increased slightly in recent weeks, there are some key factors contributing to the zinc price rally:
- Decreased LME Warehouse Inventory: While global stockpiles have risen, stockpiles specifically located in London Metal Exchange (LME) warehouses have actually decreased. This suggests a potential tightening of supply in the near future.
- Rebounding Shanghai Warehouse Inventory: Following the Lunar New Year break, warehouse inventory levels in Shanghai have rebounded. However, these levels remain lower compared to historical averages, indicating continued healthy demand in the Chinese market.
- Diversified Demand: Zinc has a wider range of applications compared to the other metals discussed previously. Its use in electric vehicle batteries and other green technologies is a bright spot for future demand.
Zinc Price Forecast: Mixed Signals
Analysts remain cautious about the long-term outlook for zinc prices. While the recent rebound is encouraging, there are still concerns about the global economic slowdown and its impact on overall metal demand. However, the long-term potential for zinc in the renewable energy sector offers a ray of hope for the future.
Weekly Raw Steel Production in the US: A Mixed Bag
While we’ve been exploring the price fluctuations of various metals, it’s important to note how these prices can impact steel production. Here in the US, raw steel production paints a mixed picture.
In the week ending on March 16, 2024, domestic raw steel production reached 1,714,000 net tons. This output translates to a capability utilization rate of 77.2 percent. This represents a slight decrease in production compared to the previous week, where output reached 1,734,000 net tons with a utilization rate of 78.1 percent.
However, there’s a positive year-over-year comparison. When looking at the same week in 2023 (ending March 16, 2023), domestic raw steel production was 1,718,000 net tons, with a capability utilization rate of 76.9 percent. This translates to a modest 0.9 percent increase in production compared to last year.
Key Takeaways:
- US raw steel production dipped slightly from the previous week in March 2024.
- Despite the week-over-week dip, production remains slightly higher compared to the same period in 2023.
- The capability utilization rate also shows a minor decrease compared to the prior week in March 2024.
These mixed signals in US raw steel production could be indicative of the complex market dynamics we’ve discussed throughout this article. Fluctuations in scrap prices, a key raw material for steel production, could be a contributing factor. Additionally, global economic uncertainties might be impacting steel demand.
It will be interesting to see how US raw steel production fares in the coming weeks and months as the metals market continues to evolve.
Conclusion: A Market in Flux, With Cautious Optimism for Steel
The global metals market is currently experiencing a period of flux. Scrap, iron ore, and coking coal prices are all facing downward pressure due to a combination of factors, including weak demand from the Chinese construction sector and an oversupply of coking coal. Zinc, on the other hand, is showing signs of strength, driven by a diverse demand base that includes electric vehicle batteries and other green technologies.
Looking ahead, the future of the metals market remains uncertain. The path of the Chinese economy will be a key determinant of metal prices in the coming months. Additionally, geopolitical tensions and the ongoing war in Ukraine could further disrupt supply chains and impact metal prices.
However, there is a glimmer of cautious optimism in the US steel industry. While raw steel production dipped slightly week-over-week in March 2024, it remains slightly higher compared to the same period in 2023. This suggests some resilience in domestic steel production despite the headwinds from the broader metals market.
Moving forward, monitoring US steel production and capacity utilization alongside key raw material costs will be important to understand how these factors influence steel pricing.
For industry participants, staying informed about these market dynamics and adapting strategies accordingly will be crucial for navigating the current uncertainty. Be sure to subscribe and follow Steel Industry News for the latest updates
Sources:
London Metal Exchange, Weekly Zinc Price and Inventory Report: March 15, 2024.
Shanghai Futures Exchange, Weekly Zinc Inventory Report: March 15, 2024.
Platts, Coking Coal Price: March 15, 2024.
American Iron & Steel Institute, Weekly Domestic Steel Production: March 12, 2024.
Prime Scrap Price, Market Conversations: Week ending March 15, 2024.
Platts, Spot Iron Ore: March 15, 2024
