US hot-rolled coil index drops on index-minus deals

Hot-rolled coil prices fell $1 per hundredweight - 2.5% - last week and now sit solidly below $40 per cwt ($800 per short ton).

Fastmarkets AMM’s daily US Midwest hot-rolled coil index dropped to $39.41 per cwt ($788.20 per ton) on Friday November 16, down 1.5% from $39.99 per cwt on the previous day and down 2.9% from a trailing five-day average of $40.60 per cwt.

HRC prices started last week at $40.42 per cwt. Lead times are approximately three to four weeks as mills continue to struggle to get order books into 2019.

Heard in the market
Prices were reported in a wide range of $37-41.50 per cwt over the course of the week.

The higher end of the range was representative of spot deals for truckload-sized volumes. Deals in the range of $37-37.50 per cwt represented prices for Brazilian slabs re-rolled at Midwest mills. Prices of $37 per cwt appeared to be outliers but might nonetheless have hurt mills’ attempts to hold spot prices above $40 per cwt, sources said.

Producers were also stymied in those efforts by competition from lower-priced, index-linked sales, sources said.

Case in point: Spot prices at the beginning of the week were $40-41 per cwt. Sales based on previously established discounts to industry price indices were available for $2 per cwt less than that.

Buyers were able to use lower-priced, index-linked deals to pressure mills to cut prices for standard spot sales as well, sources said.

Increased domestic supply in the face of largely unchanged demand might also be pushing prices downward, some said.

Quotes of the day
“There is some downward pressure. We’re seeing a little bit more in the $38.50-39.50 [per cwt] range. We are resisting quoting that on smaller orders and trying to keep the number at $40 [per cwt]… [But] from other mills, you can get $39.50 without much of an issue,” a Midwest mill source said.

“There are so many coils being churned out right now, it’s slipping a little… There is a ‘3' in front of [the price] for sure,” one Midwest steel consumer said of HRC prices.

Futures
Steel futures are lingering in backwardation. The CME Group’s November HRC contract on Friday was at $800 per ton for November, $781 per ton for December and $780 per ton for January.

By contrast, ferrous scrap futures were stuck in neutral in comparison. The CME Group’s busheling contract on Friday was at $404 per gross ton for December, $402 per gross ton for January and $400 per gross ton for February.

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

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