US HRC: Prices keep slipping as production drops

US hot-rolled coil (HRC) prices continued to decline over the last week amid a four-week slide in production and a slight expansion in lead times.

The Argus domestic US HRC index fell by $7/st to $565/st ex-works Midwest today on four indications from sell- and buy-side sources.

Lead times expanded slightly to 3-4 weeks.

US raw steel production fell to its lowest level in 2019 last week, falling to 1.87mn st for the week ending 8 June, according to data from the American Iron and Steel Institute (AISI). The data marked the fourth consecutive week of production declines in the US steelmaking industry.

The production drops were led by mills in the Great Lakes, where production fell 21,000st from the week before to 720,000st.

Steelmakers last week resisted the idea that there is domestic oversupply in the steel industry, with Steel Dynamics' (SDI) chief executive Mark Millett saying "US producers still have room to grow production."

"One has to remember that the steelmaking capability in the US is short, that's why we have imports," Millett said.

The AISI reported that last week steelmaking capacity utilization was at 80.6pc, down from 81.2pc the previous week and from a peak of 83.4pc on 9 March.

No US steelmaker has publicly announced any production curtailments.

One integrated steelmaker saw a large range of pricing from the low-$500s/st to $630/st, though transactions above $600/st were said to be "dwindling." The steelmaker said it has declined selling around the mid-$500s/st range.

Steel prices have been further pressured by a $30/gt drop for all scrap grades in Detroit, the greater midwest, Ohio Valley and Philadelphia, and a $20/gt drop in Birmingham and the Carolinas drien by weaker mill demand and abundant supply.

Prices for HMS 1/2 80:20 cfr to Turkey are down to $298/t compared to a peak of $314.90/t at the end of May.

Prices for HRC imports into Houston remained stable at $590/st ddp.

Markets breathed a sigh of relief last week after President Donald Trump announced he had reached a deal with Mexico and would indefinitely suspend imposing tariffs on all goods coming from Mexico. In response to immigration issues Trump had threatened tariffs of 5pc beginning 10 June on all goods coming in from Mexico that could have ratcheted up to 25pc by October and owuld have impacted a wide range of products.

The CME HRC futures market for July fell by $12/st from 4 June to $553/st yesterday. August prices fell $34/st to $542/st, while September prices fell $25/st to $561/st. Steel traders now expect forward prices to remain below $592/st for the rest of 2019.

Summary of market activity heard by Argus

• HRC, US: Tradeable value at $570/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $580/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $550/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $560/st ex-works Midwest, according to buyer