US HRC: Prices slip on weak spot demand

US hot-rolled coil (HRC) prices fell this week amid continued steady contract demand and a sluggish spot market.

The Argus weekly domestic US HRC index fell by $3.75/st to $704.25/st ex-works Midwest today on seven indications from buy- and sell-side sources.

Lead times held steady at 5-6 weeks as customers continued to take advantage of lower contract prices and avoid the spot market.

One large service center said mills refuse to back down from higher spot prices and buyers are unwilling to pay a premium for steel, instead opting to max out their contracts to the fullest possible extent.

Cold-rolled coil (CRC) and hot-dipped galvanized (HDG) prices are both around $845/st, with lead times between 8-9 weeks.

A fall in US domestic scrap markets removed support for steel prices over the past week. April scrap prices in the Ohio Valley, Midwest and southeast, fell by up to $25-30/gt from March for certain grades. US raw steel production remained strong, rising 0.8pc to 1.93mn st for the week ending 6 April from 1.91mn st in the prior week. Utilization rates edged up 0.6 percentage points to 82.8pc, remaining at levels not seen since 2008.

Several upcoming outages could weigh on production. The Nucor-Yamato joint venture mill in Arkansas is expecting a shutdown for the week of 14 April, while NorthStar BlueScope's 2mn st/yr mill will have a three-day outage from 22-24 April for maintenance.

Global banking group Credit Suisse forecast in a note published today that the upcoming expansion of US electric arc-furnace (EAF) steel production between 2021 and 2022 - what it has termed the "Sheet Tsunami" - will drop HRC prices down to $610/st in 2022. The firm warned that companies like integrated steelmaker US Steel would most likely be negatively impacted by increased sheet production.

Multiple companies have announced plans to build new mills. North Carolina-based steelmaker Nucor recently announced it has chosen Kentucky for its new 1.2mn st/yr, $1.35bn steel plate mill, while Indiana-based Steel Dynamics (SDI) is considering a site outside of Corpus Christi, Texas, for a 3mn st/yr, $1.8bn flat-rolled mill. US Steel is working to build its first EAF at its tubular operations in Birmingham, Alabama. The new facility will produce 1.6mn st/yr of solid rounds for use in the production of tubular products for the energy industry.

The Chicago Mercantile Exchange forward curve for May dropped $10/st from 1 April to $689/st on Monday. June prices also fell, dropping by $7/st to $689/st from the week prior, while July prices fell $5/st to $688/st. Traders now expect steel forward prices to stay below $690/st for the rest of 2019.

Summary of market activity heard by Argus

• HRC, US: Tradeable value at $685/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 $700/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 $700/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $740/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $710/st ex-works Midwest, according to buyer