US HRC sentiment stabilises despite scrap decline

Low stock levels and a lack of imports stabilised sentiment in the US hot rolled coil (HRC) market this week, despite the impending fall in August scrap settlements and summer demand.

Buy-side sources and traders said the market was in the $900-920/st range, while integrated steelmakers were selling above the $910/st midpoint.

Prices for shredded scrap and cut grades are expected to fall by around $15-20/gt in the August buy-week, with primes slipping to a smaller extent. But previous concerns about quiet HRC activity subsided, with most buy-side sources suggesting it was the normal seasonal lull and not a precursor of protracted price falls. "People are starting to let the quietness in the market drive them a bit mad … but I just don't see anything that will change things in the next couple of months," one buyer said.

Two large integrated steelmakers with impending outages were booked for August and beyond, while one mini-mill that had previously offered discounts to close out August rolling had filled its order-book. Sources said lead times averaged around five-six weeks, with slightly shorter times available from some mini-mills and longer times from blast furnace-based mills.

Import arrivals will be low in the next couple of months as few buyers have wanted to commit to large supplies — hot rolled imports fell by 26.6pc month on month in June to 168,815t, the American Iron and Steel Institute said.

Turkish material was still competitively priced at $820/st CFR Houston with duties paid this week — and perhaps lower for large buys — but a three-four month lead time was discouraging purchasers. The Chicago Mercantile Exchange curve is still factoring in lower pricing going forward, with November and December settling at $807/st and $804/st, respectively, on 26 July.

"People should be buying these forward numbers. Those prices are going to go up, fundamentals are strong and the tariff doesn't look to be going anywhere", one trader said. "People are nervous so staying very short, plus outflows are good so inventories are tight", he added.

Buyers confirmed they were purchasing hand-to-mouth given the uncertainty of late. But low inventories meant they could not defer purchases for too long.

But by the end of the week, sources were questioning what might happen to the Section 232 25pc steel tariff as it related to the EU, after President Donald Trump and European Commission President Jean-Claude Juncker agreed to come to a resolution, and not to have tariffs on EU car imports into the US.

"The US has argued that steel suppliers will need to accept either tariffs or quotas, implying that the EU is unlikely to secure totally free access to the US steel market", investment bank Jefferies said in a note. The bank said it could weigh on US prices somewhat.

A Canadian service centre source said any ripple effect would not be felt for the next four-six weeks if 232 was amended in some way. Canadian mills were also still able to ship into the US as the recent depreciation of the Canadian dollar mitigated some of the 25pc tariff, he said.