SMU Data and Models

SMU MoMo Index Bounces Back into Positive Terrirtory

Written by Brett Linton

The Steel Market Update Steel Price Momentum Index (MoMo) for hot rolled steel in the United States moved back into positive territory this week following a brief negative dip last week. 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 days.

MoMo was measured at +2.04 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 +2.66 percent, following a change of -1.58 percent last week. This indicates that the downward movement seen in hot rolled price momentum over the last eight weeks has reversed and is now positive.

To get a wider sense of the change in the MoMo Index and eliminate weekly fluctuations, we take an average of the MoMo changes over the past three weeks, a three week moving average (3WMA). The 3WMA change in the MoMo Index is +0.05 percent, following a change of -1.73 percent the week and a -2.40 percent change two weeks ago. This shows that the downward movement previously seen in hot rolled price momentum has moved to a near neutral movement.

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 $610-$640 per ton with an average price of $625, up $20 over the previous week.

Brett Linton

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