US hot-rolled coil index nears $780/t; EAF mill targets $840/t

Hot-rolled coil prices in the United States have surged on confirmed buying activity and incredibly thin spot availability, prompting at least one electric-arc furnace (EAF) coil producer to quietly communicate a base price increase to customers, Fastmarkets has learned.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $38.80 per hundredweight ($776 per short ton) on Monday November 23, up by 5.1% from $36.90 per cwt on Friday November 20 and an increase of 6.7% from $36.35 per cwt one week earlier.

The index now stands at its highest since the price was calculated at $39.33 per cwt on November 21, 2018.

Inputs were received in a broad range of approximately $37-42 per cwt. This spread represents new mill offers, confirmed purchasing activity, deals heard and general assessments of current spot market pricing levels.

Heard in the market
Hot band prices have logged a series of steep jumps amid an unparalleled shortage of spot material, with pent-up demand hitting the spot market while major steel-consuming industries continue to recover from the impact of the Covid-19 pandemic.

At the same time, there is little threat of imported material arriving in the United States and capping the uptrend. HRC supplies also have been thin in other global markets, and producers in countries such as Turkey have been focusing on domestic buyers, sources said.

This reality, along with a strong forecast for December’s ferrous scrap trade, has reportedly led one EAF steelmaker to issue new offers at $840 per ton for January 2021 bookings, sources said, describing the higher offers as an unofficial hike.

And those offer prices may soon be reflected in the spot market, given that buyers are reportedly running on lean inventories and increasingly anxious about securing spot tons, according to market participants.

Quotes of the day
“I do think that the price is still playing catch-up with the spot market. It is definitely tight with the capacity that was idled, and still [is] idled, due to Covid,” a steel consumer said. “Demand is definitely outpacing current production. You would be hard-pressed to get spot tons at anything below $40 [per cwt], so that is what we are basing our costs on.”

“In the short term it’s not about the price, it’s all about access to supply,” a Midwest service center source said. “You thank the mill for availability and don’t question the price.”

“The question becomes how relevant pricing is if availability is so limited and the efficiency of the market is challenged,” a second Midwest service center source said.

“Everybody is worried about the future of pricing,” a Gulf Coast distributor said, describing the current market as a “pretty rare situation.”

Index calculation
Prices at the top end of the input range were discarded, because those represented new mill offers not yet accepted by buyers. The assessor carried over a non-transactional input within the producer sub-index due to day-to-day volatility.

Michael Cowden in Chicago contributed to this report.

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