US HRC price slips; buyers seek mill transparency

Hot-rolled coil prices in the United States retreated slightly, one day after soaring to a 12-year high, while spot market supply might be insufficient to serve the needs of manufacturers potentially for months.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $46.44 per hundredweight ($928.80 per short ton) on Tuesday December 15, down by 0.7% from $46.78 per cwt on Monday but up by 6.3% from $43.72 per cwt one week earlier.

Inputs were received in a wide range of $42-51 per cwt. The low end and middle of the range represented confirmed purchases and deals heard, while the higher numbers represented the latest speculative offers from mills that might not yet have physical tons to promise at those levels. One mill offer at the highest end of the range was discarded by the assessor because it lacked corroboration that buyers were willing to accept such a price. One input was carried over in the producer sub-index due to a lack of liquidity.

Heard in the market
HRC prices continue to hover around their highest levels since September 2008. Lead times are mostly into February, with windows for ordering spot tonnage proving to be very narrow and short-lived.

Steelmakers have reported that burgeoning contract volumes and belated restocking by service centers, together with idlings and outages earlier in the year, have caused a bottleneck at the mill sites. Therefore, spot availability is scarce and prices are spiking. Some sources report that downstream steel-consuming manufacturers are panic-buying out of fear that they will not have enough raw material to fulfill orders in the first quarter of 2021.

Service centers and sheet consumers are now seeking more transparency from mills regarding first-quarter spot volumes. Because contract buyers have reported that mills are delivering only the minimum required agreed-to tonnage or even placing contract customers on allocation, distributors said there must be greater ability to roll spot tons than the mills are letting on.

The current market tightness, soaring prices, opaqueness of steel availability and reported manufacturing disruptions are causing some market participants to question whether Section 232 has become a net negative for American industry and national security because the import quotas and tariffs have inhibited a vital safety valve for US companies in need of steel to thrive.

Quotes of the day
“Definitely in uncharted waters,” according to one coil consumer, who sees current hot-rolled prices already moving above $47 per cwt.

“Prior markets with price run-ups were never this constrained. You could always get material. It just simply came at a higher price. This time around, so many buyers just cannot get material... I think buyers are being cautious in not wanting to agree to those type [of] numbers too far out, but the mills are not letting anyone book far out. So it is keeping inventories extremely low and buyers guessing,” this source said.

A service center source offered a similar view.

“Many companies are walking away from business because they can’t get enough steel to cover their requirements, including some original equipment manufacturers that can’t find material to cover their needs... The other side of this market will be a certified bloodbath,” the service center source said.

“We are going to stay the course and buy what we need and nothing more... Lead times are stretched, and the mills are going to ride this wave until everyone’s shelves are filled. When the buying stops, the prices will change. My message would be: Stop the panic buying,” a second distribution source said.

A third distributor said that “it’s not the pandemic that is running us into the ground, it’s our own suppliers... The mills should be ashamed of themselves for... raising pricing to a ridiculous amount knowing that it will come crashing down. As a service center, I now hope that Section 232 is repealed and tariffs are lifted so we can enjoy the flow of foreign material again. The mills don’t deserve the protection that they were given, because they are abusing it.”

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