US HRC price finds groove at $31.50/cwt; market expected to move higher

Hot-rolled coil prices in the United States have settled in at around $31.50 per hundredweight ($630 per short ton), and market participants expect them to continue moving higher in the weeks ahead.

Fastmarkets daily steel hot-rolled coil index, fob mill US was calculated at $31.58 per cwt on Thursday October 8, up by 0.2% from $31.52 per cwt on Wednesday and by 3.2% from $30.59 per cwt one week ago.

Inputs were received between $29.50 and $33 per cwt – a spread of $3.50 per cwt. Deals were recorded in a modestly narrower range of approximately $31-33 per cwt.

Heard in the market
Lead times are about seven to 10 weeks, or as far as mid-December. And several domestic mills are effectively closed for 2020 business once maintenance outages, holidays and contract commitments are considered, market participants said.

Long mill lead times, lean customer inventories and panic buying among consumers placed on allocation or controlled order entry should offset concerns about flat October scrap prices and keep HRC pricing supported through at least year end, sources said.

And some predicted that mills, which announced price increases last week, might be poised to roll out another round of them within the next two weeks, sources said.

Any such increase might gain traction because supplies remain constrained for the short term due to limited import competition, a strike at NLMK USA, integrated mills not restarting some furnaces that were idled at the onset of the Covid-19 pandemic and seasonal maintenance outages, sources said.

Strong automotive activity could also support higher prices from the demand side, some sources said.

The supply squeeze should ease once mills return from planned maintenance, new capacity ramps up, existing capacity is restarted, and assuming Brazil’s Section 232 slab quota resets to previous levels in 2021, sources said.

Prices might then turn downward, perhaps as quickly as they rose, some sources said. The potential triggers for a correction include uncertainty about the November elections, a resurgence in Covid-19 cases and worse than expected economic news, they said.

On the demand side, triggers for any softening in pricing could include an easing in non-residential construction in 2021, they said.

But while some sources said a correction could happen as soon as late December, others said there was little to stop domestic mills from raising prices into January or February.

Quote of the day
“Most [mills] have very little spot available for the rest of the year. Service center inventories [are] very low. I don’t see how prices can go down until at least the end of December,” one Midwest source said. “Mill lead times trump everything.”

Index calculation
Inputs were received across all three sub-indices. One input was received via a data submitter agreement.

Elizabeth Ramanand in New York contributed to this article.

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