The COVID-19 pandemic has resulted in weaker global demand for steelmaking raw materials. However, the cost of producing and delivering many of these commodities has also fallen. Strong demand in China is helping to buoy prices for iron ore and other materials.
Table 1 summarizes the price changes through May 21 of the five materials considered in this analysis. It reports the month/month, three months/three months and year/year changes on a percentage basis.
The Chinese import price of 62% Fe content iron ore fines bounced between $82-$97 per dry metric ton in the first quarter, now up to $95.6 as of May 20, nearing the first quarter’s high of $96.7. Figure 1 shows the price of 62% Fe delivered North China since January 2018.
The price of premium low volatile coking coal FOB east coast of Australia rose to $116.0/dmt as of May 20, a minor change of pace from April’s sharp decline (Figure 2). Recent coking coal prices are at their lowest levels seen in our limited history.
Most of the pig iron imported to the U.S. currently comes from Russia, Ukraine and Brazil. This report summarizes prices out of Brazil and averages the FOB value from the north and south ports. The latest data through May 20 shows an average pig iron price of $275 per metric ton, down from $325 in February and March. Pig iron prices have declined erratically since hitting a peak of $400 per ton in mid-2018 (Figure 3).
Hot rolled steel prices fluctuate up and down with the price the mills must pay for their raw materials. Changes in the relationship between scrap and iron ore prices offer insights into the competitiveness of integrated mills, whose primary feedstock is iron ore, versus the minimills, whose primary feedstock is scrap. Prices for both prime/busheling and obsolete/shredded scrap have moved up in recent weeks as supplies have tightened due to the coronavirus shutdowns and related disruptions to scrap collection. Figure 4 shows the relationship between shredded and busheling, both priced in dollars per gross ton in the Great Lakes region.
Figure 5 shows the recent spread between the price of iron ore, at $95.6 per dry metric ton, and shredded scrap at $273 per gross ton. Both ore and scrap have moved higher in recent weeks, lending some support to finished steel prices.
To compare the two, Steel Market Update divides the shredded scrap price by the iron ore price to calculate a ratio (Figure 6). A high ratio favors the integrated/BF producers, a lower ratio favors the minimill/EAF producers. As the 2.85 ratio shows, the recent increases in the price of ore have outpaced the increases in the price of scrap, adding slightly to the minimills’ competitive cost advantage.
Figure 7 shows how the price of hot rolled steel tracks with the price of shredded scrap. Shred rose by approximately $50 from April to May, while hot rolled prices were flat over that same one month period.
Zinc, used to make galvanized and other products, declined in price for much of the first quarter but started rebounding in the second quarter (Figure 8). The LME cash price per pound of zinc as of May 21 was $0.8918, up over the mid-March low of $0.8239 but down from the mid-January peak of $1.1186. The price of zinc factors into the coating extras charged by the mills for galvanized products. Aluminum prices, which factor into the price of Galvalume, have been relatively flat since early-April, with the LME cash price per pound of aluminum as of May 21 at $0.6728.
Brett LintonRead more from Brett Linton
Latest in Steel Products Prices North America
HRC vs. CRC price spread jumps in second week of new year
The spread between cold-rolled coil (CRC) and hot-rolled coil (HRC) prices jumped during the week of Jan. 8 as cold rolled tags continued to rise while hot rolled tags held steady.
Cliffs increases sheet prices again, seeks $1,150/ton HRC
Cleveland-Cliffs is now targeting base prices of $1,150 per ton for hot-rolled coil (HRC), according to a press release on Wednesday morning, Jan. 3.
Cliffs moves sheet prices higher, seeks $1,100/ton HRC
Cleveland-Cliffs is now targeting base prices of $1,100 per ton ($55 per cwt) for hot-rolled coil (HRC).
SMU price ranges: Sheet surge continues on limited spot availability
Sheet prices shot higher again this week on the heels of another round of mill price increases as well as on reports of production and supply chain issues at certain domestic producers.
Galvanized Sheet’s Premium Over Hot Rolled Hovering Around $200/Ton
The spread between hot-rolled coil (HRC) and galvanized sheet base prices has been hovering near $200 per net ton since late July, according to SMU’s latest analysis.