US tariffs on Turkish HRC trouble traders

US president Donald Trump's doubling of the Section 232 tariff on Turkish steel imports to 50pc dominated discussion in the US hot-rolled coil market this week.

Traders were trying to ascertain how much material they have on the water and whether to clear customs and put it into bonded-warehouses, or explore different options. Material on order but not yet sailing is likely to end up in other markets, such as Europe or Canada.

Buyers were wondering when their material would arrive and if they would have to share some of the increased duty, while mills aimed to capitalise on the disruption. There was already muted talk of $20/st price rises.

Argus' inaugural US HRC index was assessed at $896.75/st ex-works Midwest on August 14, based on 10 indications of repeatable value from buy and sell-side participants and four reported deals.

"One of the variabilities with 232 is the unpredictability of it. It seems like product out of France should be fine, but what if [Trump] does not like Macron", a trader said, encapsulating the building uncertainty in the market.

"With a simple tweet, Trump can fundamentally change market dynamics, [so] buyers will likely remain cautious. No one wants to be long at these prices," a service center source on the US east coast added.

Turkey is not a substantial steel exporter to the US. But the increased duty could support the market in two ways — by causing issues for material already on the water, and by raising uncertainty over trade defence measures, potentially reducing import activity, leading to a more captive market for domestic mills.

Underlying sentiment negative

The market trend appears to be bearish overall, aside from the Turkish issues.

This is the time of year when mills may do deals to ensure orderbooks are full, even if it means sacrificing a few dollars, one large steelmaker said.

Deals were heard in a wide range. Some participants alluded to transactions being done as low as $860/st, although others questioned if these were representative spot levels.

A buyer said he could get a single truckload at $900/st from several mini-mills, and as low as $880/st for larger tonnages. Another said $890/st was representative of the spot market, while a seller still estimated value above $900/st.

A trader said it was plausible some mills would sell at $860/st, although he indicated value at $870/st. A buyer in the north said he could book 1,000t at near to $860/st, while a trader said $900/st was still repeatable. Another buyer said sub-$900/st was possible for August rollings, but would not be carried forward by first-tier mills.

Some said any price cuts offered by certain mills had not stimulated too much activity. "I think they are getting the message, if we really drop the price it is still not enticing big tonnes. I am not going to quintuple my buy, and I do not think many other buyers are either," one buyer said.

Another suggested buyers were talking prices down as they were becoming concerned about a V-shaped recovery — with the market reaching its nadir in November, before pushing back up on low levels of inventories and import arrivals.