Among steelmaking raw materials, the prices of iron ore, pig iron, scrap, zinc and aluminum continue to see large gains in December compared to months prior, up as much as 65 percent year over year. Iron ore, pig iron and scrap prices have seen significant increases compared to the late summer months. Coking coal prices had widened through mid-October but have since declined, down 24 percent over levels one year ago.
Table 1 summarizes the price changes through Dec. 22 of the seven materials considered in this analysis. It reports the month/month, three months/three months and year/year changes as a percentage.
The Chinese import price of 62% Fe content iron ore fines has been on the rise since May. Figure 1 shows the price of 62% Fe delivered North China since January 2018, currently at $155.0, up 64.9 percent over levels one year ago.
The price of premium low volatile coking coal FOB east coast of Australia had jumped up in September/October, then declined to a low of $98.5 in late-November. Prices have slightly recovered since, currently at $103.0 dollars per dry metric ton as of Dec. 16 (Figure 2). The seaborne coking coal price has not been able to fully benefit from the strong demand in China due to import restrictions. Recent coking coal prices remain at their lowest levels seen in SMU’s 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 December shows an average pig iron price of $450 per metric ton, up 23 percent in just one month, and up 64 percent from the May 2020 low of $275. Pig iron prices had declined since mid-2018, but have risen each month since June 2020 (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. Figure 4 shows the spread between shredded and busheling, both priced in dollars per gross ton in the Great Lakes region. Scrap prices have increased 26-35 percent in the last month, up 37 percent over September, and up over 50 percent compared to this time last year.
Figure 5 shows the recent spread between the price of iron ore, at $155 per dry metric ton, and shredded scrap at $390 per gross ton. Ore has steadily moved higher since May.
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 2.52 ratio shows, minimills continue to hold a more competitive cost advantage. This ratio hit an all-time low of 1.86 in late-August 2020 (in our 12+ year limited data history).
Figure 7 shows how the price of hot rolled steel generally tracks with the price of shredded scrap. Shred rose by approximately $100 from November to December, while hot rolled prices have risen $215 per ton over since late-November.
Zinc and Aluminum
Zinc, used to make galvanized and other products, has steadily risen since March, reaching an 18-month high last Friday (Figure 8). The LME cash price per pound of zinc as of Dec. 22 was $1.2586, up 53 percent from the mid-March low of $0.8236. The price of zinc factors into the coating extras charged by the mills for galvanized products. Many mills have revised their coating extras upwards in December to reflect the higher zinc price. Aluminum prices, which factor into the price of Galvalume, have also been trending upwards over the last few months. Note that aluminum prices often have large swings and return to typical levels within a few days, as seen in the graphic below. The LME cash price per pound of aluminum was $0.9008 as of Dec. 22.
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