SMU Data and Models

SMU HR Price MoMo Index Turns Negative After 28 Weeks

Written by Brett Linton

July 20, 2016

The Steel Market Update (SMU) Price Momentum Index (MoMo) for hot rolled steel in the United States turned negative this week, following a 28 week positive streak. MoMo is a trailing indicator and shows the relationship between the current U.S. hot rolled coil price movements against the previous 12-week average price as a percentage. A positive MoMo index indicates hot rolled steel prices are moving in an upward direction compared to the previous 12 week period, while a negative index number indicates a downward direction of prices.

MoMo should not be confused with the SMU Price Momentum Indicator which is a forward looking indicator. The SMU Price Momentum Indicator is currently at neutral indicating prices are in a state of flux and could move in either direction (+/- $20/ton) over the next 30 days.

MoMo was measured at -0.77 percent this week, meaning that the current HRC price is lower than the average price over the last 12 weeks.

The change in MoMo can be a useful indicator in depicting the severity of price movements and evaluating the directional trend for flat rolled steel prices. The week-over-week change in MoMo was -1.96 percent, following a change of -1.61 percent last week. This indicates that there is a downward movement in hot rolled price momentum and that movement has slightly accelerated compared to the previous week.

To get a wider sense of the change in the MoMo Index and eliminate weekly fluctuations, we calculate a 3-week average change. The 3-week average change in the MoMo Index is -2.24 percent, following a change of -2.35 percent the week before. This also shows that there is a downward movement in hot rolled price momentum and the rate is similar to that of the previous 3-week period.

The graph below demonstrates the relationship between the SMU hot rolled coil price, the SMU Price MoMo Index, and the three week moving average change in the MoMo Index. As published in our Tuesday evening issue, the SMU HRC price range for this week is $600-$630 per ton with an average price of $615, down $5 per ton from last week.

Brett Linton

Brett Linton is a senior analyst for Steel Market Update, where he began his career. Linton has been in the steel industry since 2010. He has held roles as a category manager and strategic insights director at Reibus before returning to SMU in 2024. He is a graduate of The University of North Georgia with a degree in Finance and Accounting. Brett can be reached at brett@steelmarketupdate.com or 724-314-0179.

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