Market Commentary

The Chinese price was among the first global HRC prices to start trending lower after the initial run up caused by the Russian invasion of Ukraine. This was primarily because it became clear that China would be a safe harbor for Russian material, but also because the COVID-zero policy which led to domestic lockdowns was bearish for their demand. The chart below shows the Chinese domestic price (translated into USD/s.ton), the current level is at its lowest since October 2020.

As prices initially fell, the supply side was slow to react, however, over the last couple of weeks clear trends have developed to combat lower prices. The chart below shows capacity utilization in Tangshan, the country’s most significant steel-producing city. Utilization has decreased for 6 straight weeks, and it is currently just above the recent low point in March of this year.

Additionally, the chart below shows inventory levels at key mills, which appear to have peaked in mid-June, with production in the region also down 7.1% compared to July of last year.

The sustained lockdowns and property slump are the most severe headwinds for the Chinese steel market, however, there is no doubt that the government is fully committed to supporting this part their economy via stimulus measures. The looming question for the global market going forward is how the demand in China will respond to the recent throttle down in supply not only in China but in the rest of the world as well.


Below are the most pertinent upside and downside price risks:

Upside Risks:

  • China reopening its economy with further stimulus measures
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Energy issues abroad curtailing global production
  • Easing supply chain restraints and labor shortages causing an increase in manufacturing activity
  • Reluctance in placing import orders, leading to a dramatic reduction in arrivals later this year


Downside Risks:

  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Increased domestic production capacity leading to an increase in competitive pricing
  • Steel consumers substitute to lower-cost alternatives
  • Limited desire to restock at elevated prices and persistently short lead times causing a “Buyer’s Strike”
  • Economic slowdown caused by increasing interest rates

HRC Futures

The Platts TSI Daily Midwest HRC Index was down $50 to $850.

The CME Midwest HRC futures curve is above last Friday’s settlements in orange. Both the front and back end of the curve rose last week with middle months Nov-22 and Dec-22 remaining unchanged.

The 2nd month ferrous futures moved primarily higher last week with Iron Ore Futures surging back above $100, up 8.4%. Aussie Coking Coal Futures fell 7.8% last week.

Global flat rolled indexes moved mostly lower, led again by Chinese Spot HRC, down 8.8%, while NE TSI HRC gained 1.9%.

The AISI Capacity Utilization was down 0.5% to 78.9%. This is the lowest level of utilization since the initial COVID recovery, in May of 2021.

Imports & Differentials

July flat rolled import license data is forecasting a decrease of 136k to 823k MoM.

Tube imports license data is forecasting a decrease of 94k to 494k in July.

July AZ/AL import license data is forecasting a decrease of 20k to 84k.

Below is July import license data through July 18th, 2022.

Below is the Midwest HRC price vs. each listed country’s export price using pricing from SBB Platts. We have adjusted each export price to include any tariff or transportation cost to get a comparable delivered price. Differentials decreased across the board as their corresponding prices fell more significantly that the U.S. domestic price.

SBB Platt’s HRC, HDG, and CRC pricing is below. The Midwest HRC price was down 5.6%, HRC fell 4.4%, and CRC remained unchanged.

Raw Materials

Raw material prices moved primarily lower last week with losses led by Pig Iron Brazil, down 16.5%. SGX ORE 2m Futures rose the most, up 8.4%

Below is the iron ore future curve with Friday’s settlements in orange, and the prior week’s settlements in green. Last week, the entire curve shifted sharply higher.

The ex-flat rolled prices are listed below.

Chinese Inventory

Below are inventory levels for Chinese finished steel products and iron ore. Inventories decreased sharply for Rebar and the 5 city inventory, while Iron Ore and HRC inventory increased 1.8% and 1.5% respectively.

Economic Data

The remaining significant economic data is to the right.

Base & Precious Metals

Base and precious metal futures ended higher across the board last week with LME nickel leading gains, up 14.1%. Gold also gained 2.5% as Dollar strength showed some signs of easing.


The U.S. dollar fell 1.25 to 106.73, while the Turkish Lira fell 3.5%.


Last week, the August WTI crude oil future fell $2.89 or 3% to $94.70/bbl. The aggregate inventory level decreased 0.1%. The Baker Hughes North American rig count increased 6 rigs, while the U.S. rig count increased 2 rigs.


The U.S. 10-year yield fell 16 bps, closing the week at 2.75%. The German 10-year yield was down 10 bps to 1.03%, and the Japanese 10-year yield lost 2 bps to 0.22%.


Below are equity indexes and steel related companies:

The list below details some upside and downside risks relevant to the steel industry.  The bolded ones are occurring or highly likely.

Upside Risks:

  • Inventory at end users and service centers below normal operational levels
  • Higher share of discretionary income allocated to goods from steel intensive industries
  • Changes in China’s policies regarding ferrous markets, including production cuts and exports
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Energy & construction industry rebound
  • Easing labor and supply chain constraints allowing increased manufacturing activity
  • Mills extending outages/taking down capacity to keep prices elevated
  • Global supply chains and logistics restraints causing regional shortages
  • Fiscal policy measures including a new stimulus package
  • Contentious union labor negotiations leading to supply disruption
  • Fluctuating auto production, pushing steel demand out into the future
  • Threat of further protectionist trade policies muting imports

Downside Risks:

  • Increased domestic production capacity
  • Elevated price differentials and hedging opportunities leading to sustained higher imports
  • Steel consumers substitute to lower cost alternatives
  • Steel buyer’s and consumers “double ordering” to more than cover steel needs
  • Tightening credit markets, as elevated prices push total costs to credit caps
  • Supply chain disruptions allowing producers to catch up on orders
  • Limited desire to restock at elevated prices, causing a “Buyer’s Strike”
  • Economic slowdown caused by the emergence of Coronavirus Variants
  • Reduction and/or removal of domestic trade barriers
  • Political & geopolitical uncertainty
  • Chinese restrictions in property market
  • Unexpected sharp China RMB devaluation