US hot-rolled coil index flat; sources say ‘shortage’ is here

Hot-rolled coil prices in the United States held steady while more service centers tried and failed to enter the spot market for January 2021 shipments, with some buyers now unable to supply customers with enough tonnage to fulfill downstream needs.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $36.31 per hundredweight ($726.20 per short ton) on Tuesday November 17, little-changed from $36.35 per cwt on Monday November 16 but 2.4% higher than $35.46 per cwt one week ago on November 10.

Inputs were received in a range of $34.50-37.50 per cwt.

Heard in the market
Lead times were reported to be into late January or February 2021.

For the first time, sources stated that the shortage of spot availability for approximately the next two months - or longer - is beginning to slow down manufacturing activity in the United States, because distributors and steel consumers cannot procure enough tonnage to satisfy orders from their downstream customers. Mills are even putting a lid on contract volumes by holding those buyers to a minimum or placing them on allocation.

The root of the problem is the reduction in production capacity at the sheet mills earlier this year, in the face of the current strong demand from the automotive industry, construction suppliers and other manufacturing customers. Moreover, service centers did not sufficiently replenish their stock during that period, when the Covid-19 pandemic and US federal elections were creating uncertainty and a reluctance to buy steel, according to some sources.

Quotes of the day
“It continues to be a disaster, as we have customers trying to increase demand inside of lead time and all kinds of opportunity to pick up new business if we can start sooner rather than later,” one HRC consumer said. “The truth of the matter is that I cannot find enough steel. I need spot availability and a lot of it. Most mills... are not even sure how many tons they will be able to offer. I have a growing backlog that I need to buy and a list of customers waiting on me to price their quotes so they can send in orders. This is by far the worst I have ever seen the market. If I could find 100,000 tons right now, I would buy it. The problem is, I am only expecting to find a couple thousand tons here or there.”

“There is a steel shortage currently as we speak, and the situation will get more drastic going into the first quarter... If you don’t have a deal that guarantees January availability, you are on the outside looking in. They may not be able to offer spot, and they are trying reduce the amount of contract availability. This is all just a culmination of a couple months of reduced capacity, and that’s not going away,” a midwestern distributor explained.

Index calculation
Inputs were carried over in the producers sub-index due to a lack of liquidity.

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