US HRC: Prices plunge on falling demand

Market: Metals
31/03/20

Domestic US hot-rolled coil (HRC) spot prices plunged this week as the steel market digested a slew of closures from automakers, parts manufacturers and steel mills due to the coronavirus pandemic in the US.

The Argus weekly domestic US HRC index fell by $40.50/short ton (st) to $539.50/st ex-works Midwest on seven indications from buy-side sources.

Lead times fell by a week to five weeks as no mills reported booking new orders.

Prices struck a wide range this week, with mills saying they saw no reason to chase business due to the fall off in demand and buyers reporting having multiple mills bidding prices down on an order.

Many market participants reported order cancellations and customers closing their businesses due to the shutdown of automakers in the US and the original equipment manufacturers (OEMs) that supply them.

One service center said orders worth thousands of tons had been canceled, and many market participants are still reviewing their orders and inventories to figure out what projects will be fulfilled.

Many expressed increased concern at what would come in May, when demand is expected to plummet. Earlier this week, President Donald Trump extended social distancing guidelines in the US through to 30 April.

April ferrous scrap prices are expected to fall between $30-$50/gross ton (gt), depending on quality and region. Deep uncertainty has gripped the scrap market, as many have shut down peddler flows as part of government orders and to protect their staff, and flows of prime material has dried up with the closures of auto plants.

Today automaker Ford became the latest in the US to extend its shutdowns. The company had originally planned to restart some US plants on 14 April, and it has delayed those plans indefinitely.

Fiat-Chrysler Automobiles (FCA) announced last week it was extending its shutdowns, as did Japanese automaker Toyota's US operations.

Last week integrated steelmaker Cleveland-Cliffs, which recently purchased AK Steel, and US Steel announced the closures of multiple blast furnaces. Cleveland-Cliffs idled the 2.2mn Dearborn Works in Detroit, which primarily served the auto industry, while US Steel announced the idling of its 1.5mn st/yr No 4 blast furnace at its Gary Works mill in Indiana. The blast furnace had been scheduled to be taken down for maintenance, but will be idled until market conditions improve.

US Steel also took down the more than 1mn st/yr blast furnace A at its Granite City works in southern Illinois. The idling may have been due to the previous decision by the steelmaker to idle its tubular mills, according to a market participant.

Including previous idlings by ArcelorMittal at its Indiana Harbor West mill, more than 5mn st/yr of flat-rolled steelmaking capacity in the US has been taken offline. ArcelorMittal also idled a blast furnace at its Dofasco mill in Canada.

Gerdau last week idled 1mn st/yr of melting operations at its special steel mills, as a result of the auto shutdowns.

HRC import prices into Houston dropped by $50/st to $580/st ddp as no domestic buyers picked up lower international offers.

After plunging in the prior week futures prices in the CME HRC futures market recovered somewhat over the last week, with May prices rising by $9/st to $495/st. June futures prices increased by $11/st to $485/st, while July prices rose by $11/st to $485/st. August prices increased by $18/st to $496/st, and September futures prices jumped by $30/st to $510/st. October HRC futures prices rose by $28/st to $518/st, while November prices settled up by $23/st to $518/st. December HRC prices are at $519/st.

Summary of market activity heard by Argus:

HRC, US: Tradeable value at $534/st, ex-works Midwest, according to buyer
HRC, US: Tradeable value at $577.50/st, ex-works Midwest, according to buyer
HRC, US: Tradeable value at $560/st, ex-works Midwest, according to buyer
HRC, US: Tradeable value at $500/st, ex-works Midwest, according to buyer
HRC, US: Tradeable value at $550/st, ex-works Midwest, according to buyer
HRC, US: Tradeable value at $525/st, ex-works Midwest, according to buyer
HRC, US: Tradeable value at $530/st, ex-works Midwest, according to buyer

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