SMU Data and Models
SMU Price MoMo Index Postive for Sixth Week
Written by Brett Linton
December 21, 2016
The Steel Market Update (SMU) Price Momentum Index (MoMo) for hot rolled steel in the United States remained positive for the sixth consecutive week, following a 17 week long negative 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 Higher indicating that steel prices are expected to rise over the next 30-60 days.
MoMo was measured at 13.24 percent this week, meaning that the current HRC price is higher 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 -0.58 percent, following a change of +0.75 percent last week. This indicates that there is now a slight downward movement in hot rolled price momentum, meaning the rate of increasing prices has peaked and is slowing down compared to last 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 +1.68 percent, following a change of +2.26 percent the week. This shows that there is still an upwards movement in hot rolled price momentum but it is slightly slowing down.
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 $580-$610 per ton with an average price of $595, up $5 over one week ago.
Brett Linton
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