US HRC: December discounts weigh

The US hot-rolled coil market fell for a sixth week as producers with December availability continued to aggressively discount prices amid limited buying activity.

The Argus weekly US hot-rolled coil (HRC) index dropped by $8.75/st to $754/st ex-works midwest on three deals and indications from six buy- and sell-side sources.

A midwest minimill was heard to have sold as low as $720/st for a few hundred tons, with a broader range of $720-760/st heard amid firmer offers for January production. Larger orders of more than 1,000st were heard in the range of $700-720/st.

Two midwest producers have been particularly aggressive in cutting prices to fill December availability, though such discounts may disappear in coming weeks as at least one of the mills was heard to have filled its December book.

Other producers remained firm on the week at closer to $760/st as lead times hover around four weeks. A deal for small tonnage at this level was concluded this week for January production.

Most buyers and sellers downplayed rumors that mills will announce another price increase before year-end in an effort to put a floor under the market.

"I think it might be a struggle to get an announcement effectively communicated between now and Christmas, and a bad idea to announce one between Christmas and [the New Year holiday]," a producer suggested.

"This is probably the worst environment to try one," a buy-side source said amid widespread buyer sentiment that increases would garner little traction in a market that is expected to continue to fall in 2019.

Some suggested that January might be better timing on the back of stronger demand, but buyers show little sign of accepting higher prices going into the new year.

"Buyers are wanting to continue to push lower prices, but the mills are not willing to be as aggressive as of yet, so it is pretty much a standstill," a source said.

US HRC prices have fallen by $75/st since mills moved to set a floor under prices in early-October by announcing $40/st increases in offer prices. Prices are down by around $170/st, or nearly 20pc, from summer highs.

The HRC forward curve also continues to point to further drops, with January futures contracts on the Chicago Mercantile Exchange (CME) trading down by $7/st Tuesday at $739/st.

Expectations of further softening in domestic prices in January are also weighing on the import market, with buyers hesitant to go long on foreign steel for 2019 delivery amid uncertainty over the direction of US prices.

The Argus assessment of imported HRC remained unchanged at $700/st ddp Houston, with offers heard as low as $680-685/st ddp.

Licensed hot-rolled imports in the first week of December were in line with the same month of the prior year at around 5,000 st/day but down from nearly 6,000 st/day licensed in November.

South Korea was the largest source of import tonnage licensed early in the month, followed by Germany, the Netherlands, Mexico and Canada.

Canada was the largest supplier in November, followed by South Korea, the Netherlands, Mexico and Japan.

Summary of market activity heard by Argus in the latest week:

• HRC-US: A buyer purchased around 2,000t below $720/st ex-works
• HRC-US: A buyer bought 380t at $720/st base ex-works
• HRC-US: A buyer bought 300st at $760/st ex-works
• HRC-US: A buyer was offered a few hundred tons at $740/st ex-works
• HRC-US: A seller estimated tradable value at $772.50/st ex-works Midwest
• HRC-US: A seller estimated tradable value at $770st ex-works Midwest
• HRC-US: A buyer estimated tradable value at $750/st ex-works Midwest