Hot-rolled coil (HRC) prices have fallen for a fifth consecutive week in the USA due to a strike by buyers, lower scrap prices and increasing concerns about demand among some consumers.
But outlooks have diverged sharply on whether the trend will continue or reverse if the strike ends as lead times stretch into 2018 amid limited import competition from foreign mills and widespread outages at domestic mills.
In the meantime, Metal Bulletin sister publication AMM’s HRC index has dropped to $29.33 per hundredweight ($586.60 per ton), down 0.6% from $29.52 per cwt ($590.40 per cwt) previously and only 33 cents per cwt ($6.60 per ton) above the 2017 low of $29 per cwt ($580 per ton) recorded in June.
The decline began a month ago, when AMM’s HRC price stood at $31.55 per cwt ($631 per ton).
Lead times average two to four weeks, but are significantly longer – six weeks or more – at mills impacted by outages, market participants said.
“The biggest indicator at the end of the day are lead times, and nothing has really changed there” except at mills taking outages, a Mid-Atlantic service center source said. “The mills are all singing about how the market will be strong in the first quarter. They always do this time of year. But God only knows where the market will be then.”
That uncertainty – perhaps greater this year than in past years because of questions about US trade policy, in general; and the fate of president Donald Trump’s Section 232 investigation, in particular – is reflected in an AMM poll on where HRC prices will end 2017.
Of 202 total respondents, 33% voted that prices would finish the year “down a little” from where they are now, followed by 25% who thought they would settle “up a little”. Another 17% said 2017 would end with prices “down a lot” while 16% predicted prices would be “sideways”. Only 9% thought prices would be “up a lot”.
Buyers on the bearish side of the coin cited concerns over declining auto sales, stagnant energy prices and lacklustre construction activity. Also hurting HRC are scrap prices, which settled sharply down this month.
“Demand is still king. And unfortunately the king is sitting on his [butt] right now,” one Midwest service centre source said.
But other market participants cautioned against reading too much into what might be a temporary lull in prices. Prices often bottom in the fourth quarter as mills discount to fill year-end books. They can shoot up quickly once those books are full and when buyers realise the deals have dried up, they said.
For example, HRC prices sank to $23.50 per cwt ($470 per ton) in October 2016 and then jumped 21.70% to $30 per cwt ($600 per ton) by year-end, according to AMM pricing records.
“The domestics are competing against themselves right now,” one southern distributor said, questioning whether they would continue to do so for long given that US prices are roughly on par with import prices once inland freight is taken into consideration.
AMM’s assessment for imported HRC stands at $580-600 per ton ($29-30 per cwt) cfr Port of Houston.
“Import only makes sense if you’re near Houston and it’s cheaper for you to pick it up at the port than at the mill,” the southern distributor said.
source: metalbulletin |
