US HRC: Prices fall on growing skepticism for 2019

: Metals
19/08/27

US hot-rolled coil (HRC) spot prices fell matching lower futures prices and more market participants voiced doubts that demand would increase in the coming month.

The Argus weekly domestic US HRC index declined by $7/st to $590.75/st ex-works Midwest today on seven indications from buy- and sell-side sources.

Lead times slipped to 4-5 weeks from 5 weeks out on 20 August as a lack of market activity ate away at existing times.

The CME HRC futures market have continued to weaken, with prices for October down by $19/st to $572/st, while HRC futures for November dropped by $19/st to $572/st. December futures fell by $22/st to $572/st. Futures traders don't expect HRC prices to reach $600/st until October 2020, a stark turnaround from just two weeks ago when the futures market expected HRC prices to be above $600/st beginning in September.

US scrap prices are expected to weaken during the September buy.

Amid market participants pessimism about the future of pricing has reigned, with some describing the recent bump in prices as a "dead cat bounce" at a major steel conference underway in Atlanta.

The Argus HRC price hit $599/st on 6 August, up by 15pc from the yearly low of $521.75/st at the end of June after three months of declines.

While contract demand is still reportedly strong, few market participants are confident of a late-year demand increase as the market enters what typically is a slower season.

Maintenance-related outages between the end of the third quarter through the fourth quarter of more than a million short tons are not expected to impact pricing in the market.

Last week JSW Steel announced that it is halting construction of its electric arc furnace (EAF) mill in Baytown, Texas, saying that facility will be supplied from its underutilized Mingo Junction, Ohio EAF. The 1.5mn t/yr (1.65mn st/yr) Ohio EAF was said to have produced 80,000t in the third quarter that ended June 30, a little more than a fifth of its top line run rate.

The pullback by JSW came just days after NorthStar BlueScope confirmed it would move ahead with its own 850,000t/yr expansion at its Delta, Ohio EAF mill.

In Atlanta skepticism is rife about integrated steelmaker US Steel's announcement 13 August that it wants to do away with spot market-based adjustable price contracts for 2020. During a panel discussion on Monday steel service center Ryerson's chief executive Ed Lehner told US Steel "good luck" with their plan to change contract terms.

One source said despite the doubts the word is that US Steel was moving full steam ahead with the plan. The company's new method will involve transaction-by-transaction discussions, including monthly negotiations.

Import prices into Houston stayed flat at $600/st on continued low trading activity.

Summary of market activity heard by Argus

HRC, US: Tradeable value at $605/st ex-works Midwest, according to seller
HRC, US: Tradeable value at $590/st ex-works Midwest, according to buyer
HRC, US: Tradeable value at $595/st ex-works Midwest, according to buyer
HRC, US: Tradeable value at $605/st ex-works Midwest, according to buyer
HRC, US: Tradeable value at $590/st ex-works Midwest, according to buyer
HRC, US: Tradeable value at $575/st ex-works Midwest, according to buyer
HRC, US: Tradeable value at $575/st ex-works Midwest, according to buyer

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