Market Commentary

This week, we continue looking at economic data released earlier in the month. The chart below comes from the steel-intensive components of the July durable goods report. The chart below shows shipments in blue, new orders in red, and (new orders minus shipments) with the green/red bars. When the gap between orders and shipments is growing (green), it shows that steel-intensive industries are having a hard time keeping up with current demand. In June, this index went negative for the first time since November 2021 and it was flat in July, with new orders and shipments decreasing to their lowest levels since February.


Durable Goods

The table below contains the final data from the July Durable Goods Report, which shows that new orders were mostly higher YoY but considerably below June levels.  The main takeaway from the report is that OEM activity slowed compared to last month, but continues to outperform 2021.

Despite growing at a slowing pace YoY, Total Manufacturing New Orders Ex-Transportation increased for the 20th consecutive month.

The chart below looks at the months on hand (inventory divided by shipments) from the July durable goods report, using categories that are steel intensive. MoH jumped this month, driven by a 0.8% increase in inventories and an 11.2% decrease in shipments. Typically, July is a down month for shipments, however, this year it was well below normal levels.


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 up $20 to $820.

The CME Midwest HRC futures curve is below, with last Friday’s settlements in white. The majority of curve shifted higher, most significantly in the front, which led to an overall flattening of the curve.

The 2nd month ferrous futures were mixed this week. Iron ore gained 10.1%, while Busheling lost 5.6%.

Global flat rolled indexes were all higher last week, led by Black Sea HRC, up 3.85%.

The AISI Capacity Utilization was down sharply, 1.5%, to 77.8%.

Imports & Differentials

September flat rolled import license data is forecasting a significant decrease of 233k to 768k MoM.

Tube imports license data is forecasting an increase of 101k to 548k in September.

September AZ/AL import license data is forecasting an increase of 22k to 136k.

Below is September import license data through September 6th, 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 increased last week for most of the watched countries, as the U.S. Midwest price continued it’s rise above $800. Russia and Turkey were the two countries that saw a decrease in their differential.

SBB Platt’s HRC, CRC, and HDG pricing is below. The Midwest HRC was up 2.5%, while the CRC & HDG prices were unchanged on the week.

Raw Materials

Raw material prices were mostly lower again last week, with East Coast shredded down 10.1%, while the 2nd month iron ore futures gained 10.1%.

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 rebounded sharply higher, this was an anomily as most of the steel raw materials were weak.

The ex-flat rolled prices are listed below.

Chinese Inventory

Below are inventory levels for Chinese finished steel products and iron ore. The trend that began mid-June with HRC, Rebar, and 5-city inventories all moving lower continued this week, while iron ore stocks at the ports fell for the first time in 10-weeks.

Economic Data

The remaining significant economic data is to the right.

Base & Precious Metals

Base and precious metal futures were mostly higher last week, led by LME nickel, which gained 12%, while Silver also gained 5%.


The U.S. dollar was down 0.53 to 109, while the Japanese yen lost 1.6%.


Last week, the October WTI crude oil future lost $0.08 or 0.1% to $86.79/bbl. The aggregate inventory level increased 1.3%. The Baker Hughes North American rig count decreased by 4 rigs, while the U.S. rig count decreased by 1 rig.


The U.S. 10-year yield was up another 12 bps, closing the week at 3.31%. The German 10-year yield was up 17 bps to 1.70%, and the Japanese 10-year yield was up 1 bps to 0.25%.


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
  • A 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 issues abroad curtailing global production
  • 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
  • The 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 buyers 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 the property market
  • Unexpected sharp China RMB devaluation