US HRC: Prices slip as demand remains steady

US hot-rolled coil (HRC) prices fell slightly this week as demand continued to under perform.

The Argus weekly domestic US HRC index fell by $12/st to $698/st ex-works Midwest today on five indications from buy and sell-side sources — the first time in a month US HRC prices have fallen.

The pullback comes as demand remains lower than expected, despite mills' increases designed to force buyers' hands.

Demand from the from the automotive industry has remained steady after sales were hampered by multiple severe storms across the US in the first two months of this year. Auto dealer sentiment for the first quarter, while higher than in the fourth quarter of 2018, is still in negative territory, according to an industry survey by US firm Cox Automotive.

Lead times remained between 4-6 weeks, with HRC lead times at one integrated mill as low as three weeks. An arc-furnace mill said lead times were 4-5 weeks, with demand increasing across the economy except in the automotive industry.

Steel buyers have continued to restock where needed but are not building inventories out, citing the lack of stable policies coming out of President Donald Trump's administration. Uncertainty over the state of the US-Mexico-Canada Agreement (USMCA) and Section 232 steel tariffs on Canada and Mexico continue to be a problem. Canadian and Mexican officials have said steel and aluminum tariffs of 25pc and 10pc, respectively, should be removed as a condition of ratifying the USMCA, which is meant to replace the North American Free Trade Agreement (Nafta).

Auto dealers are also concerned possible 232 tariffs could be imposed on vehicles, which Cox's report saying would impact auto sales "dramatically".

Other finished steel products have seen their lead times widen dramatically as imports have fallen. Lead times for cold-rolled coil (CRC) and hot-dipped galvanized (HDG) products are now 8-9 weeks. Customers have apparently been caught by surprise by the long lead times, with CRC prices around $830/st and HDG at $840/st.

The Chicago Mercantile Exchange forward curve has pulled back slightly in the last week, with April settling at $721/st on Monday compared with $728/st a week earlier. May was at $721/st, while June prices settled at $720/st.

Summary of market activity heard by Argus

• HRC, US: Tradeable value at $705/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $690/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $705/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $710/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $680/st ex-works Midwest, according to buyer