Hot-rolled coil prices in the United States have increased to $32.50 per hundredweight ($650 per ton), and some sources think they could peak at $35 per cwt or more before the market cycles back down.
Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $32.50 per cwt on Tuesday October 13, up by 0.5% from $32.35 per cwt on Monday and by 2.7% from $31.65 per cwt one week earlier. The index is now at its highest point since reaching $32.51 per cwt on April 30, 2019.
Heard in the market
Inputs were received in a wide range of $29-36 per cwt - a spread of $7 per cwt. Such wide spreads often occur when markets are inflecting, and most sources agreed that domestic prices continue to inflect upward.
Inputs were received across all three sub-indices: Producer, distributor and consumer. Transactional data was received at around $32.50 per cwt, or at published list prices for some US mills.
Deals above that amount have also been transacted by buyers caught short on inventory due to limited output at certain producers, continued strong automotive activity, and steadily improving demand across other sectors, sources said.
Higher prices have also been supported by lead times stretching into late November or December at many mills, market participants said, with some noting that an increasing number of domestic mills are sold out for the balance of 2020.
More supply will come into the market in the months ahead when new capacity is started, idled capacity is restarted and slab availability increases, sources said.
But that will do little to relieve a supply squeeze in the fourth quarter resulting from widespread maintenance outages, a strike at NLMK USA and Brazil’s Section 232 slab quota being slashed, they said.
Some service centers, finding themselves unable to secure tons from domestic mills, have resorted to buying from other centers in order to have material on hand to sell to downstream customers, sources said.
One casualty of the extreme recent volatility in pricing could be 2021 contract talks, some sources said.
Domestic prices fell to their lowest levels in more than four years in late July and early August. They have since risen to their highest point in more than a year and a half.
End-user sources - some used to paying approximately $25 per cwt for HRC and struggling to grasp the sharp rise in prices - might be unwilling to accept a price above $30 per cwt, let alone near $35 per cwt, sources said. The result could be 2021 contract talks extending well into the first quarter, they said.
Quote of the day
“All of a sudden the spigot will turn back on, the supply will come in and the prices will come back down – that’s our concern. But you’re not going to get any cheaper steel for the rest of the year,” one Midwest service center source said.
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