US HRC: Prices tick up as demand increases

US prices for hot-rolled coil (HRC) ticked up this week as demand in the first quarter appears to be strong, with many mills booked through February.

The Argus weekly domestic US HRC index rose by $1.25/st to $606.25/st ex-works Midwest today on six indications from buy and sell-side sources.

Lead times have extended to 8-9 weeks as many mills are booked through February, with some beginning to book into March.

Some believe the outage at ArcelorMittal's Indiana Harbor East mill, where an explosion took a 4.1mn st/yr blast furnace offline on 27 December, will have wide reaching impacts on supply in the US steel market. ArcelorMittal has not responded to questions regarding the length of the outage at the mill.

The January scrap buy may give an added boost to HRC prices, with prices up by $30/gross ton (gt) in early trading.

Final import numbers for November came in at their lowest rate in a decade at 1.4mn metric tons (t) (1.55mn st), while through November 2019 imports were down by 17pc compared to the same period in 2018. That represents a year-over-year decline of nearly 5mn t (5.5mn st) of import volume in 2019.

While tightening domestic supply and lower imports may help to continue boost prices, there are continuing warning signs of weakness in the US economy. A closely watched survey of US factory activity showed the sector contracted in December at its fastest pace since 2009, signaling that US manufacturing remains in a slump even as the overall economy has been resilient to trade-war and policy uncertainty.

The Institute for Supply Management's (ISM) factory purchasing managers' index (PMI) fell to 47.2 in December from 48.1 the prior month. Analysts had expected a gain.

Readings below 50 signal contraction while those above 50 signal growth. The headline index has fallen for eight consecutive months and has shown contraction for five months, the longest such run since early 2016.

HRC import prices into Houston rose by $20/st to $660/st ddp as international steel prices have continued to rise and demand for imported HRC remained muted amid lower domestic prices and long international lead times.

Plate prices were flat at $687.50/st on low demand.

The CME HRC futures market rose slightly compared to last week, with March HRC prices flat at $586/st while April future prices rose by $2/st to $587/st. May prices increased by $2/st to $587/st, while June HRC futures stayed flat at $585/st. Futures prices for 2020 now top out at the $587/st mark in February, April and May, up by $1/st compared to last week's high of $586/st in February and March.

Summary of market activity heard by Argus

• HRC, US: Tradeable value at $620/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 $592.50/st, ex-works Midwest, according to buyer
• HRC, US: Tradeable value at $605/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 $620/st, ex-works Midwest, according to buyer