August 3, 2022

Rising coronavirus cases, increasing inflation, and a shrinking raw material supply could lead to lower steel demand in Japan, according to Japan’s Ministry of Economy, Trade and Industry. The agency recently predicted that 3Q steel demand could dip by 1.8% year-over-year to 20.96 million mt. On a similar note, Toyota has lowered its production forecast by approximately 58,000 vehicles for July and by roughly 150,000 vehicles in August due to a parts shortage, according to S&P Global.

Due to already slumping demand in the US and abroad, steel prices at the CME have dropped by nearly 50% so far this year, as prompt month August CME HRC futures last traded at $817/st (7:00 AM CST). Due to this downward pressure, the forward curve for HRC has shifted lower by nearly $300/T since early May.  This could be a good time for steel end-users such as automotive equipment manufacturers (OEMs) to hedge future needs by buying swaps or call options. Both of these strategies would establish a maximum steel price. Such positions are basic for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (8/3/2022)

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Price Indications

Today's Charts

AEGIS Insights

07/27/2022: AEGIS Factor Matrices: Most important variables affecting metals prices

07/27/2022: American Automotive Production is on the Rebound

07/20/2022: Interest in Hedging Cobalt is Increasing

07/07/2022: Have Copper Prices Begun to Find a Bottom?

8/2/2022: Copper price falls as Taiwan tensions spark risk-off selling

8/1/2022: Japan's manufacturing at 10-month low in July on auto parts shortage, rising costs

8/1/2022: Gas cuts unnerve ferro-alloy market as trade slows

7/31/2022: Column: China's exports smooth aluminium supply-chain disruption

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