Some question negative narrative in US HRC market

Despite negative sentiment in the US spot hot rolled coil (HRC) market, there is a feeling among some buy and sell-side participants that things could stabilise or nudge up going forward.

Buyers are increasingly confident they can achieve sub-$900/st ex-works for HRC from mini-mills at present, but some think underlying tightness might continue into the fourth quarter.

"I can see things perking up after Labor Day as seasonally it's quite strong then. There has been no fundamental change, [I] don't see demand weakening or supply rising much," one buyer in the Midwest said. The macroeconomic backdrop remains strong, he said, alluding to healthy GDP growth.

With blast furnace 3 at Luxembourg-based steelmaker ArcelorMittal's Indiana Harbor works down after a bell fell in during the charge, and US Steel conducting 10-day maintenance at its Gary hot strip mill in October, sources said supply could be more constrained than previously expected.

"ArcelorMittal is already tight, [these] tonnes out of the market will keep it tight," another buyer said. "Activity is pretty good, everyday this week has been robust," he said, though admitted July was slightly behind forecast in terms of sales.

The Chicago Mercantile Exchange forward curve might have November at $805/st, but one buyer said a mill would "tell me to go jump" if he asked for that price now. The curve is pricing in policy uncertainty as well as the restart of domestic capacity, and a potential pickup in imports given the disparity between pricing in the US and elsewhere.

Competitive import offers into the Houston region are raising a few eyebrows, but uptake is not big. "Mexico did come in and offer a few tonnes. They asked me if I wanted to buy 5,000-10,000t, but I told them they're too late," another large buyer said. Prices of sub-$800/st delivered into Houston may be attractive for the immediate region but not everywhere.

The buyer said he wants to reduce his supply, but only by three-to-four days. He also said that some people who lost out on supply in the tight market earlier this year have turned to imports, but more to ensure they have steel rather than to cash in on comparatively low pricing.

"To me there's a little disconnect, people think it is going to soften just because it's so high," one source said.