SMU Data and Models

SMU MoMo Index Continues Downward Dive

Written by Brett Linton

The Steel Market Update Steel Price Momentum Index (MoMo) for hot rolled steel in the United States remained negative this week for the sixth consecutive week, following an eight week streak of being in positive territory. 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 remain steady over the next 30 days.

MoMo was measured at -7.57 percent this week, meaning that the current hot rolled steel price is lower than the average price over the last 12 weeks. The last time the MoMo Index was this low was the week of November 1, 2016 when it was -8.21 percent.

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 -1.70 percent, following a change of -1.20 percent last week. This indicates that there is a continued downward movement in hot rolled price momentum, and that downward movement is accelerating compared to last week.

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 -1.23 percent, following a change of -1.45 percent the week before. This also shows that the movement in hot rolled price momentum remains negative, and is moving lower at a slightly slower pace compared to the previous week.

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 $550-$610 per ton with an average price of $580, down $15 over the previous week.

Brett Linton

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