US HRC: Prices fall as market remains oversupplied

US hot-rolled coil (HRC) prices continued to decline sharply as the market remained oversupplied.

The Argus domestic US HRC index fell by $21.50/st to $572/st ex-works Midwest today on seven indications from sell- and buy-side sources.

Lead times remained at 2-4 weeks, with buyers saying they were able to receive shorter lead times if they requested.

A buyer picked up 40st for just under $545/st, while another said they could achieve as low as $520/st.

Lagging demand and production growth driven by the restart of several mills is likely to be behind the oversupply. US raw steel production for the week ending on 1 June was 1.89mn st, with utilisation rates at 81.2pc, according to the American Iron and Steel Institute.

US steelmakers are estimated to have produced 41.2mn st of steel, up 6.2pc from the same period in 2018.

No steelmaker in the US has indicated that they will cut back production even as prices continue to decrease and demand remains weak.

With the June scrap trading week happening now, many expect prices to fall at least $10/t ($9.10/st). Gains made in the Turkish market after US steel tariffs were reduced from 50pc to 25pc were erased last week as prices for HMS 1/2 80:20 ended May down $17/t to $298/t cfr.

Prices for HRC imports into Houston fell by $25/st to $590/st ddp. Importers from South Korea and Mexico are trying to compete with prices in the domestic US market, but buyers are still hesitant to purchase imported steel given long lead times and continued price weakness in the domestic market.

Auto sales seem to have surprised some in May according to Cox Automotive, whose senior economist Charlie Chesbrough said the sales pace estimate for May is around 17.4 million vehicles, up from the 16.4 million vehicle rate in April. Chesbrough says, however, that the recently threatened 5pc tariff on all goods from Mexico by President Donald Trump – which could ratchet up to 25pc by October – would have impacts on the US auto market. Price increases aside the implementation of such tariffs on the border could disrupt trade flows of all goods crossing the border including steel used in vehicles and other products.

The CME HRC futures market for July fell by $19/st from 21 May June to $565/st yesterday. August prices fell $17/st to $576/st, while September prices fell $7/st to $586/st. Steel traders now expect forward prices to remain below $600/st for most of 2019.

Summary of market activity heard by Argus

• HRC, US: Tradeable value at $590/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $560/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $550/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $570/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $570/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $590/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $575/st ex-works Midwest, according to buyer