US HRC: Doubts rise with steel prices, slow spot market

US hot-rolled coil (HRC) spot prices rose for a fourth consecutive week as the spot market remained quiet and mills pushed for pricing above $600/st.

The Argus weekly domestic US HRC index rose by $11/st to $599/st ex-works Midwest today on six indications from buy- and sell-side sources.

Lead times stayed steady at 5-6 weeks with many mills still booked through mid-September and little movement on the spot market.

Demand remained steady as buyers kept purchasing from contracts, where spreads between contract and spot numbers are between $20-40/st.

But the spot market has slacked off since a flurry of activity a few weeks ago as buyers attempted to secure steel at lower prices. Some buyers have voiced concern that price increases could be short lived unless demand picks up and pushes lead times into October. Lead times have been stagnant for the last two weeks

The July Purchasing Managers' Index (PMI) signaled slowing growth at a reading of 51.2pc, down half a percent from June and the fourth consecutive month of slowing expansion in the index. A fabricated metal products manufacturers said there had been a drop in demand for steel products, and other respondents cited trade uncertainty as a factor for the slowing rates of growth.

Last week saw Federal Reserve Chairman Jerome Powell cite two consecutive quarters of declines in manufacturing output as one of the dark spots in the economy. Powell said he hoped cutting interest rates would help boost manufacturing, and on 31 July the Fed's open market committee cut the fed funds target rate to a range of 2-2.25pc from a prior 2.25-2.5pc.

On the raw material side, ferrous scrap prices settled up $20/gt in Detroit, with similar increases seen as trading progressed across most of the country after months of falling prices.

The Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment remained unchanged at $292/t.

Electric-arc furnace (EAF) steelmaker Nucor will have a 65-day outage beginning at the end of August at its direct reduced iron (DRI) plant in Louisiana, potentially impacting the US ferrous scrap market as Nucor looks for other sources of raw material inputs.

Pig iron prices have risen by 5pc to $367.50/t in the last six weeks, driven by supply shortages and higher iron ore prices.

The price for HRC imports into Houston fell by $12/st to $593/st on low trading activity. Traders say HRC imports still cannot compete in the US with low domestic prices and high availability from domestic mills. Few buyers want to risk buying imports at current prices with import lead times still at three months or longer.

Cold-rolled coil (CRC) and hot-dipped galvanized (HDG) prices were around $770/st and $780/st, respectively. Plate prices were heard to be around $745/st as mills tried to push a price increase amid minimal spot demand.

The CME HRC futures market for September slipped fell by $2/st to $608/st. October prices up by $3/st to $618/st, while HRC futures for November ticked up $1/st to $620/st. Steel traders expect HRC prices will be at $620/st by the end of the year.

Summary of market activity heard by Argus

• HRC, US: Tradeable value at $600/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $600/st ex-works Midwest, according to seller
• HRC, US: Tradeable value at $600/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $610/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $600/st ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $585/st ex-works Midwest, according to buyer