US hot-rolled coil index tops $37/cwt, supply chain threatened

Hot-rolled coil prices in the United States have shot above $37 per hundredweight ($740 per short ton) for the first time in nearly two years on a supply-chain squeeze potentially made worse by rising Covid-19 infections, market participants said.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $37.25 per cwt ($745 per ton) on Thursday November 19, up by 1.7% from $36.64 per cwt on Wednesday November 18 and up by 3.5% from $36 per cwt a week earlier on November 12.

The index now stands at its highest since the price was calculated at $37.40 per cwt on December 12, 2018, nearly two years ago.

Heard in the market
Inputs were received in a range from $36-40 per cwt. The sharp gains come because mill lead times have stretched into late January or early February 2021, and because some producers have sold nearly all their available first-quarter 2021 tonnage, sources said.

Long lead times coupled with mill outages – and, increasingly, Covid-19 pandemic-related supply chain shortages – have squeezed an already tight spot market even further, they said.

Some compared the panic in the market to that seen during the period after the initial rollout of the Section 232 tariffs in 2018 – except with leaner inventories and stronger demand. And others said they might move into the import market next year, even if it meant paying the 232 duties, in order to secure tons they might be unable to procure from US mills.

But there appeared to be no immediate relief coming from foreign material, given that Canada and Mexico – where producers typically ship on lead times and at prices similar to those seen at US mills – also are facing production and supply chain snarls, sources said.

The result: High US hot band prices are effectively baked into the first quarter of 2021, despite the increased risk of Covid-19 to the wider economy, most sources agreed. Some cautioned that prices could reverse rapidly should automotive shutdowns, for example, reoccur. But most said the prospect of a second wave of manufacturing shutdowns was unlikely.

Quote of the day
“Supply chain is becoming a challenge again. Many vendors are fighting Covid outbreaks. We are seeing long delays not only in steel but also in plastics, lumber, hardware – even fuel deliveries for our trucks,” one Gulf Coast steel consumer said. “I was unloading railcars yesterday because my receiving department has been decimated by Covid. We got it done, but it was a challenge nonetheless.”

Index calculation
The assessor discarded some inputs at the higher end of the input range because it was not clear whether those were distressed deals or were representative of the wider spot market.

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