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American Metal Market HRC Index

Aug 31, 2017 | 08:00 PM | Michael Cowden, Fastmarkets AMM staff

Market Commentary and HRC Index Indicators.

AMM's hot-rolled coil index inched upward by 1 cent per hundredweight (20 cents per ton) as steel mills succeeded for one more week in holding firm on their July price increases.

The hot-rolled coil index settled at $31.29 per cwt ($625.80 per ton), from $31.28 per cwt ($625.60 per ton) on Aug. 3.

Some market participants were surprised that hot band has not declined in August. President Donald Trump's administration has failed to deliver a Section 232 action so far this summer and signaled that it may not come until autumn or 2018—or may not happen at all. But global input prices are rising, and import volumes have been weak due in part to the Section 232 investigation.

"Coil is holding its ground. It's not receding," a electric-resistance-welded tube mill source said. "The coil mills are doing a good job of keeping the price up. That's a good sign, with all the turmoil in the market."

Lead times are mostly in the three-to-five-week range, with some integrated mills out as far as six to seven weeks.

Market participants reported some speculation that steelmakers may be pondering another price increase, maybe as early as the week of Aug. 14. Some buyers said demand is weakening, however, and the mills would be wise not to try to force a hike through or even to use it to maintain current support levels.

"Looks like the 232 isn't going anywhere, so they're just trying to stave off prices from sliding too fast," a Midwest distributor said. "The excuses to raise pricing for steel still don't matter because there isn't enough demand—so play all the games you want."

Some buyers see pricing support beyond what occurred when a Section 232 remedy seemed imminent. "(The) 232 crashed and burned, and that did cast some softness in the market, but the HRC market in China is firming," a West Coast distributor said.

Others envision a steady supply of hot band and plenty of risk that Trump won't be able to deliver the trade curbs, tax cuts and infrastructure spending that customers are counting on to stimulate demand.

"Capacity utilization on flat-rolled hasn't changed much. Talk of the 232 hasn't changed much," a Gulf Coast buyer said. "And Big River Steel is going to make product regardless of what happens with trade."

Instead of a Section 232, there has been some talk of the Trump administration shifting its strategy toward using a Section 301 action, probably against China. One buyer said business is already getting softer, and sentiment inevitably will shift if neither of those trade actions comes to pass.

"When scrap goes down, they don't decrease our price," a second welded tube mill source said. "Seems like the market has lost a lot of steam and we will see demand fall off a little bit, unless something happens with the 232 or 301."

With "no sign of infrastructure spending" and many of the steel industry decision-makers on vacation in August, the price increases are running out of steam, a northern distributor said.

"The (mills) have tried to hold for the longest time at $620 (per ton)," the northern distributor said. "But with 232 support and without auto being strong, they need every order they can get. ... Their order books are weaker than they would like."

Grace Lavigne, New York, and Michael Cowden, Chicago, contributed to this report. Dom Yanchunas


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