US HRC: Prices remain steady as demand fails to ramp up

US hot-rolled coil (HRC) prices were mostly steady this week as service centers continued to maintain supplies.

The Argus weekly domestic US HRC index slipped $2.25/st to $695.75/st ex-works Midwest today on six indications from buy and sell-side sources.

Lead times remained between 4-6 weeks, with one arc-furnace mill saying lead times had pushed out a week to 5-6 weeks on stable overall demand despite softer automotive requirements.

Despite two $40/st increases in January and February mills have been unable to push prices significantly higher because of continued slack demand, as service centers buy only what they need rather than building stocks ahead of the seasonally busier summer months.

US steel production of 1.93mn st for the week ending 16 March remained at levels not seen since May 2012, when production was 1.961mn st. Capacity utilization slipped 0.6pc to 82.9pc but remained at levels not seen since September 2008.

But figures for January released by the US Census Bureau today showed new orders for iron and steel mills falling $456mn to $10.695bn from $11.151bn in December, a 4.1pc drop.

January automobile shipments fell 6.4pc to $8.88bn from $9.48bn in December, while shipments of nondefence aircraft and parts dropped 10.6pc to $13.39bn in January from $14.96bn in December.

US steelmakers Nucor and Steel Dynamics (SDI) both released first quarter guidance reports in the last week. North Carolina-based Nucor said it expects lower prices to weigh on its first quarter earnings, while Indiana-based SDI says lower sheet prices and higher scrap costs will drop earnings below its fourth quarter 2018 results. Both companies blamed bad winter weather for slowdowns in shipments.

Uncertainty over the lifting of 25pc Section 232 steel tariffs on Canada and Mexico and replacement with possible quotas - a requirement demanded by those governments to pass the [US-Mexico-Canada Agreement (USMCA)](USMCA) - is further muddying the waters. The market believes pricing could come off should the tariffs on Canada and Mexico disappear. Buyers are reluctant to purchase more than they need, fearing they could buy ahead of price falls.

The Chicago Mercantile Exchange forward curve for April has pulled back slightly in the last week, with April settling at $717/st on Monday compared with $721/st a week earlier. May rose slightly to $726/st from $721/st a week earlier, while June prices settled up $4/st to $724/st from $720/st the week before. The firmer contango on the prompt months suggests traders expect the market to firm going forward.

Summary of market activity heard by Argus

• HRC, US: Tradeable value at $700/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 $700/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $700/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $690/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $695/st ex-works Midwest, according to buyer