US HRC: Prices continue to fall on weaker demand

US hot-rolled coil (HRC) prices fell this week amid continued uncertainty and slow spot trading.

The Argus weekly domestic US HRC index fell by $8.25/st to $687.75/st ex-works Midwest today on one transaction and six indications from buy-side sources.

Lead times for deliveries slipped slightly to 4-5 weeks as demand has begun to soften in some corners of the economy, while the spot market remained relatively quiet and with limited volume.

Prices have fallen by 7pc since the start of the year, when HRC sold for $740/st. A small rally in March has been evaporating for much of the last month.

Spot deals were reported in the hundreds of tons, with one electric arc-furnace (EAF)- based mill selling 200st at $690/st for May delivery to a tubular company.

Prices that market players are hearing in the steel market vary widely, from $660-700/st. Some mills may be willing to deal at even lower prices depending the size of the sale.

Prices for HRC imports into Houston fell by $15/st to $635/st ddp, with South Korea leading the drive down and few willing to buy because of unattractive lead times of three months. Weakening import levels are not helping prop up domestic prices as much as some expected.

Many in the market still feel like prices will continue to fall as production remains strong and some begin to see more holes opening up in their future order books. Continued weakness in the auto market is the biggest concern, but some see mixed signals of what direction oil and gas activity is going.

Indiana-based Steel Dynamics sees oil and gas infrastructure build-outs continuing to benefit the steel industry, in particular large natural gas projects in the southwest.

Prices continued to decline despite multiple steel mill outages hitting the market over the past few weeks, with NorthStar BlueScope's steel mill in Ohio the most recent one to go down between 22-24 April for maintenance. The Vallourec Star mill in Youngstown, Ohio, suffered an unspecified incident with its EAF on 17 April which was expected to impact it for a couple of days. US Steel's Blast Furnace #1 at its Edgar Thomson plant was shut on 8 April for at least two weeks after it suffered an issue with its top charging equipment. The company did not respond to inquiries regarding the blast furnace's operational status.

In an earnings call today, Nucor's chief executive John Ferriola pointed to new and restarted mills as reasons for falling prices, saying they are undercutting the market.

Steel Dynamics has narrowed the sites for its planned 3mn st/yr, $1.8bn flat-rolled mill to Louisiana and Texas. The plant, when operational in 2021, would have a $30/st or more cost advantage over other domestic US steel mills for the steel markets in Arkansas, Louisiana, Oklahoma and Texas, the producer said.

The CME forward curve for June fell $2/st from 16 April to $675/st yesterday. July prices rose $1/st to $676/st, while August prices were steady at $675/st. Steel traders still expect forward prices to remain below $680/st for the rest of 2019.

Summary of market activity heard by Argus

• HRC, US: Transaction at $690/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $680/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $680/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $680/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $680/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $685/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $680/st ex-works Midwest, according to buyer