US hot-rolled coil index passes $670/t; mills hoping for $700/t

Hot-rolled coil prices in the United States have crossed the $33.50-per-hundredweight ($670-per-short-ton) threshold, and most signs indicate that they will continue to march upward, market participants said.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated $33.54 per cwt ($670.80 per ton) on Tuesday October 20, up by 0.4% from $33.39 per cwt on Monday October 19 and up by 3.2% from $32.50 per cwt a week earlier on October 13.

The price stands at its highest since the index was calculated at $33.80 per cwt on April 23, 2019 - approximately 18 months ago.

Heard in the market
Inputs were received across all three sub-indices - producer, distributor and consumer - in a range from $32-35.50 per cwt. The lower end of that range represents higher-volume transactions (thousands of tons), and the higher end represents smaller volumes (hundreds of tons).

The higher end of the range also reflects pricing from certain domestic mills that have increased spot tags to $35 per cwt or higher - up by at least $2.50 per cwt from prior list prices of $32.50 per cwt - even in the absence of official price rise announcements, market participants said.

And some producers are charging more than $35 per cwt for material available on a shorter lead time. Domestic mill lead times have stretched out as far as December or January 2021, which means mills with lead times of five to six weeks can charge more from customers with lean inventories that are buying only as needed, sources said.

While there remains concern that prices could correct downward in the first quarter of the new year, most sources contacted by Fastmarkets predicted that tags would continue to trend upward at least through the US Thanksgiving holiday, celebrated in late November.

Some sources think prices might then inflect lower during the traditionally slower year-end holiday period and as lead times move deeper into the first quarter of 2021. Supplies should increase in the next few months as a result of Brazil’s Section 232 slab quota resetting, new capacity entering the market and idled capacity restarting.

But others - including some who were initially skeptical of higher prices - think prices might have more staying power than expected. Those sources pointed to strong end-use demand in the automotive sector in particular, historically low customer inventories, firm prices abroad, limited import competition - and the potential, however remote, for the Brazil slab shipment quota to be reduced again.

Quote of the day
“If these guys [original equipment manufacturers] consume what they think they are going to consume in the first quarter, I don’t think the giant falls,” one industry source said.

Grace Asenov in New York contributed to this report.

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 CEOs in global steel.

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