HRC price slips in US; next round of quotes seen higher

Hot-rolled coil prices in the United States retreated after opening the year at their highest level since August 2008, with buyers bracing for more price increases due to strong automotive-related demand and soaring ferrous scrap costs.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $50.42 per hundredweight ($1,008.40 per short ton) on Tuesday January 5, down by 2.5% from $51.71 per cwt a day earlier and by 1.6% from $51.22 per cwt on December 29.

Inputs were received in a narrow range of $50-51.50 per cwt, with fresh data received across all three sub-indices. Deals reported and deals heard were in an approximate range of $50-51 per cwt, while offers were put at $51-51.50 per cwt. Assessments spanned the full range of $50-51.50 per cwt.

Heard in the market

Tuesday’s data showed a slight pull-back on pricing, but values were still near the more than 12-year high previously established. The index has been calculated at $50 per cwt or above for eight consecutive business days, and sources said a recipe is in place for prices to spike even higher.

Distributors noted persistent difficulty in finding spot tonnage from mills, or that mills are slow to confirm pricing for orders in the queue. Very little spot material is coming available for February shipment, and mills are not expected to have any trouble filling up their March order books at high prices.

Continued strength in US auto sales has exacerbated the spot shortage because mills are able to sell higher volumes to automakers, leaving less tonnage available for non-automotive procurement, sources said. Soaring ferrous scrap costs and strong bookings through the first quarter should provide mills with pricing power for a few months, some sources said.

Quotes of the day
“I have bought every February ton I could find... and mills are simply saying they are not open for March yet, and we fear that there will be minimal to no spot availability in March,” one sheet consumer source said.

“Mills, particularly integrated, are going to make their decision on price increase[s] based on automotive demand. Since automotive demand has kept going beyond forecast, it puts a spot buyer in a very tough situation,” a trading source said.

“Rapidly rising scrap is only compounding the chaos,” according to a midwestern distributor source, who expects the current market tightness to persist into the second quarter. “Imports won’t be impactful until summer at earliest, so the only event to slow pricing is a lessening of demand or new capacity coming online, or both.”

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