US HRC slips as EAFs cut prices

US hot rolled coil (HRC) prices softened a touch this week as some mini-mills reduced offers in order to close out August order-books in a quiet market.

Several buy-side sources said they can achieve $900/st ex-works for orders as small as a few hundred tons from an electric arc furnace (EAF) in Indiana, down from $910/st last week. One buyer even said he was offered 1,000t of HRC from a supposedly busy mini-mill in the south at $900/st ex-works.

Others believed the market was still closer to $910/st.

Potentially softer scrap pricing in the August buy-week could allow EAFs to drop prices a touch without eating into their extremely healthy margins.

The usual seasonal quietness is also adding to the uncertain picture. But large-scale import bookings remain scarce, with buyers watching the still hugely backwardated forward curve. November was trading at $806/st on the Chicago Mercantile Exchange on 1 August, down $9/st from 31 July; most import offers on the table are around $800/st or above, so buyers are not willing to take the risk given material will not arrive until the fourth quarter.

"I don't think people are booking big imported tonnages, lead times are dissuading people," one buyer in the Midwest said - he booked Taiwanese coated coil for September shipment and said it would not arrive until next year.

While the forward curve is still pricing in much softer levels in the coming months, some derivatives traders cite outages and high utilisation rates – above 90pc at flat mills – as likely to reduce the discounts.

One large buyer said there is some participation from buyers for HRC imports, but there is not much for sale - those who are buying likely got shut out earlier in the year and want to ensure supply, he said.

A trader said import interest had risen, but buyers want sub-$800/st cfr Houston, which is not available without a pullback in global pricing. "Basically it's a sellers' market," he said, alluding to solid underlying demand, low stocks and falling import tonnages.

But another trader said import offers were available at substantially lower levels from Turkey and even Canada, at around $780/st cfr Houston.

While there has been some talk of NAFTA negotiations and President Trump's deal with the European Commission, nothing has changed with regards to Section 232, or the European Union's retaliatory measures against designated products from the US.

A working committee established to review the trade issues between the US and EU could take months to complete its review, one source said. The European Commission needs a mandate from the European Council before undertaking such negotiations – which several member states have said cannot happen without the removal of Section 232.