Commodity GOES M3 Stayed Range-Bound Last Month

by Lisa Reisman on MARCH 9, 2016

Despite the U.S. market operating with only one domestic grain-oriented electrical steel mill, prices fell slightly during February with the GOES MMI dropping to 185 from 192. Last month, we speculated that GOES prices might have found some semblance of a price floor due to the suspension of production at ATI’s Midland GOES operations.

Whether we consider the drop a price floor or, more likely, price movement within a narrow trading range. The GOES M3 MMI has only moved within a 16-point band since November (with a low of 175 and a high of 192). This contrasts with 2014 price activity in which we saw moves of 15 or 20 points from month to month. Perhaps we have entered a period of less volatility for GOES.

China’s Next Moves

Meanwhile, China has filed an anti-dumping case against Japanese producers of GOES. A preliminary decision is expected within the month.

With Japan as the primary supplier of high-grade GOES material, not only to China but also to the rest of the world, it remains to be seen how that will impact pricing. China likely does not have enough domestic supply of high-grade material to satisfy its own demand. Therefore, the outcome of the trade case in China could look eerily similar to the outcome from the trade case here in the U.S.

China will want to think it through carefully if it wants to export the production of wound and stacked cores to neighboring countries because a prohibitively high import duty on GOES will do just that.

That nuance between the commodity grade material and the high-grade material appears to have confounded trade case decision makers.

Broader Steel Markets

In general, steel products, with the exception of plate products, performed better than some of the other industrial metals this month, despite the overall Raw Steels MMI only holding its value from February. CRC, HDG and scrap prices all showed steady price increases. Though we remain long-term bearish on metals markets, the short- term trend looks a bit more positive and we would expect GOES prices to follow a similar trend.

Meanwhile, U.S. capacity utilization continues to notch up to 71.5% (although closed lines are removed from the calculation) further indicating some market stabilization. ATI alsosigned a union contract after a six-month lockout which should, in theory, make it simpler to bring back GOES production when market conditions improve.