US HRC: Market could be close to nadir

Market: Metals
25/09/18

US hot-rolled coil prices stabilised somewhat this week as lead times at one recently-aggressive seller nudged up a touch to four-five weeks.

The weekly Argus US domestic HRC index rose by $4.25/short ton to $847.50/st ex-works Midwest, based on three deals and indications from nine buy and sell-side sources.

Integrated mills continued to offer at $880/st for small volumes this week, while mini-mills were in the $840-850/st range.

Expectations that the market was close to a bottom continued to emerge, with some anticipating an upswing in buying and one service centre paying up by $5/st this week from its last buy. A midwest producer alluded to greater spot purchasing, and a large service centre said activity was rising at all of its plants.

Sellers were still confident that order books could fill quickly should large-tonnage buyers return to market in the coming weeks amid limited surplus capacity at home and constrained import penetration.

But others thought the eight-week buyers' strike still had further to run.

"You still have a few more weeks of this realistically before anything happens as buyers position for a low point in the market and mills try and tell everyone that things are better than they are," one large buyer said.

"We are buying based on demand and lead time," another large buyer said. "Shorter demand, shorter lead time. We'll be buying larger when demand and lead-time requires it."

Import offers were heard as low as $740/st fob Houston, duty-paid basis and $780-820/st delivered into the midwest. Offers from Canada were heard at $800/st on a duty-paid basis.

But buyers were not stocking up on foreign material as they were cautious of further downside in US prices.

Licensed hot-rolled import tonnage on the month to 18 September totalled 136,766st (124,072t), led by Turkey at 40,186st at $574/st on a duty unpaid basis, South Korea at 30,340st at $776/st and Canada at 21,960st at $797/st duty unpaid.

Higher scrap prices could also be supportive of stability in HRC, although there has been a decoupling between the two given the precipitous coil price rise. Sentiment ahead of next week's October buy-week points to flat to higher pricing for bushelling and shredded scrap used by EAF producers. Expectations are also bullish for the coming months as obsolete scrap flows slow amid high domestic mill utilisation rates.

US market participants were also keeping an eye on potential work stoppages at integrated producers US Steel and ArcelorMittal.

The United Steelworkers International (USW) said on 21 September that it would continue to negotiate with US Steel for "a little while longer" after making some progress late in the week, while negotiations with ArcelorMittal continue. Participants have been discounting the threat of a strike given it has been decades since the union actually resorted to such action.

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