US hot-rolled coil index drops below $40/cwt for first time since Section 232 announcement

Hot-rolled coil prices in the United States have fallen below $40 per hundredweight for the first time since President Donald Trump announced the Section 232 tariffs more than eight months ago.

Fastmarkets AMM’s daily US Midwest Hot-Rolled Coil Index slipped to $39.99 per cwt on Thursday November 15, down 0.7% from $40.29 per cwt on November 14 and off 12.8% from a 10-year peak, reached in July, of $45.84 per cwt.

Lead times averaged three to five weeks, market participants said.

The hot-rolled coil price was last below $40 per cwt on February 28, when the index was calculated at $38.65 per cwt, Fastmarkets records show. The index then jumped by 3.6% to $40.03 per cwt on March 1, the day Trump announced the 25% tariffs on steel imports from most countries.

Heard in the market

But the impact of tariffs has likely peaked, sources said. And prices are expected to lose ground while product exemptions continue to be granted and once more countries gain exclusions from the 232 duties in exchange for agreeing to quotas.

With demand stable – planned infrastructure spending appears to be on the back-burner – and supplies increasing, the hot-rolled coil price is poised for further declines into 2019. The index could suffer a correction should prices for oil and other commodities continue to slide, and should financial markets remain volatile, some said.

Still, others insisted that the steel market is at or near a bottom, indicating that buyers who remain on the sidelines do so at their own risk.

Quotes of the day

“Oil has fallen off. Watching the trend for 2019, [commodities] all seem soft – so I’m pretty bearish on the market… I think we peaked this year, and now we’ll see what happens [in 2019],” one steel consumer said.

“Market pricing is going to continue to soften into next year… Demand is stable, but there is plenty of supply,” a Midwest service center source said. “The impact of Section 232 is at its peak and can only soften from here.”

“People shouldn’t wait too long waiting for the bottom, because things can turn fast,” a southern distributor warned.

Hot-rolled coil futures continue to be in backwardation: The CME Group’s HRC futures contract settled on Thursday at $801 per short ton for November, $789 per short ton for December and $786 per short ton for January 2019.

In contrast, ferrous scrap futures were roughly flat, with December and January both settling at $402 per gross ton, while February settled marginally lower at $401 per gross ton.

Muyao Shen in New York and Nat Rudarakanchana in Chicago contributed to this report.