SMU Data and Models
SMU HR Price MoMo Index Changes Pace
Written by Brett Linton
October 26, 2016
The Steel Market Update (SMU) Price Momentum Index (MoMo) for hot rolled steel in the United States remained negative this week for the 15th consecutive week, following a 28 week long 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 in 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 lower indicating that steel prices are expected to decline over the next 30-60 days.
MoMo was measured at -11.81 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 +1.89 percent, following a change of -1.72 percent last week. This indicates that the downward movement previously seen in hot rolled price momentum has turned positive compared to the previous week. Note that the SMU HRC price was revised on Friday of last week, therefore revising the MoMo Index we published in last Thursday’s issue.
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 +0.01 percent, following a change of -0.69 percent the week before. This shows that the downward movement previously seen in hot rolled price momentum has ceased. Readers should note that this is the first positive 3-week average change since May 2016 (22 weeks).
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. Click here to view and interact with it on our website. As published in our Tuesday evening newsletter, the latest SMU HRC price range is $440-$500 per ton with an average price of $470, unchanged from our Friday price adjustment and down $15 over our price from Tuesday the 18th.
Brett Linton
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