US hot-rolled coil index hits $32/cwt; mills in the driver’s seat

Low inventory levels and longer lead times have pushed hot-rolled coil prices in the United States up to their highest in 17 months, with mills holding most of the negotiating power.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $32 per hundredweight ($640 per short ton) on Friday October 9, up by 1.3% from $31.58 per cwt on Thursday October 8 and 3.3% higher than $30.99 per cwt one week ago on October 2. The index is now at its highest since the price was calculated at $32.04 per cwt on May 10, 2019. 

Inputs were received in a range from $28-34 per cwt – a spread of $6 per cwt. 

Heard in the market
Lead times are as far out as mid-December, according to market participants. And some steel suppliers – such as California Steel Industries and USS-Posco Industries on the US West Coast – have closed their order books through the end of the year.

While some buyers still believe that prices may fall after the US Thanksgiving holiday, an increasing number expect prices will remain elevated through the end of the year. That’s mostly because of tight supply, they said.

Demand has been strong in certain sectors, such as residential construction, but remains weak in other sectors, such as oil and gas. As a result, overall demand is not the driver behind the current price rebound, sources said. 

Reports of offers from mills at levels above $32.50 per cwt were for deliveries in October and November, according to sources.

With most lead times in December, buyers that did not stock up previously – on the expectation that prices would have fallen by now – have been caught short if they need material sooner. As a result, some mills have taken the opportunity to put prices for those spot tons higher than current offers for December shipments.

Quote of the day
“A lot of people usually restock in the fourth quarter,” a steel consumer said. “I typically place more orders in October for December production than any other month in the year, and I can’t this year. So we’re still going to be short on our historic restocking going into the first quarter of next year, the busy season. I don’t think it’ll be a crazy shortage, but it’ll be spotty and tight with longer lead times for awhile.”

Index calculation
Non-transactional inputs at the high end of the input range were discarded because they could not be confirmed. Inputs were received across all three sub-indices: producers, distributors and consumers.

Fastmarkets’ flagship global steel event, Steel Success Strategies, is running as an online conference on October 26-28, 2020. Register today to hear directly from Fastmarkets’ pricing experts and analysts, as well from some of the most important chief executive officers in global steel.