US HRC: Uncertainty persists after price hikes

The US hot-rolled coil market was stable this week as cautious buyers remained largely on the sidelines in response to higher mill quotes.

The Argus domestic HRC index nudged up by 25¢ to $839/st ex-works Midwest on four reported deals – all for small tonnages – and indications from buy- and sell-side sources.

Service centers in need of tons to fill steady downstream orders booked small volumes at around $840/st, while a large-volume order was heard at $760/st.

But overall order activity was limited on the week as buyers remain cautious over price direction, with recent increases gaining limited traction.

A steelmaker said the market was "slowly" accepting price increases, but admitted that buyers were in no rush to book material. There could be another increase announcement in the next month to pull buyers off the sidelines and stimulate December order books ahead of the holiday, sources said.

Mill lead times are moving out on the back of brisker order intake and larger orders booked in recent weeks.

One mini-mill was telling customers it was booked out for November after operating on slimmer lead times of late, while another was also said to be more extended.

"I am not getting calls from the mills looking for tons so they must be getting enough orders to keep them happy," a service center source said.

Still, some service centers remain more concerned with de-stocking rather than building inventory given the lack of clarity.

"Even though all the data [shows] two months' stock, it's like my competition is behaving like they have more on hand," a buyer said.

Uncertainty over the future of tariffs on key flat-rolled suppliers also weighed on sentiment on the week.

There was widespread chatter that the Section 232 tariff on Turkey would return to 25pc after the Trump administration doubled the rate to 50pc in August amid political tensions over an American pastor detained in Turkey. The administration signaled a willingness to lift the additional rate after Turkey released the pastor this month.

European sources suggested that Turkish mills have stopped seeking new business in the region after several months of very competitive offers, possibly expecting renewed business with the US.

Traders moving Turkish coil into the US have also signaled they will likely be back soon with competitive offers.

Mexican material was being sold into Houston at around $750-760/st ddp today, and Turkey would also be attractive for US buyers, sources said.

One buyer said the removal of tariffs on Canadian and Mexican material, as part of the revamped Nafta, could depress prices overnight. But this would depend largely on what the tariff was replaced by – for example, a 70pc quota based off the last three years' average imports could prove more detrimental to buyers than the current duty.

"I'm working from the assumption the administration isn't going to do anything to help imports," one trader said.

Hot-rolled import volume licensed for October rose by 85,095t to 155,752t through 24 October from the prior week.

South Korea accounted for the largest share at 46,503t, followed by Canada at 44,567t. The Netherlands accounted for 15,466t, while 12,891t were licensed from Egypt and 11,264t from Mexico.