Tightened spot availability pervades US HRC market

Spot supply for hot-rolled coil products has remained thin since the start of the year as market participants have focused heavily on contractual commitments, while some steelmakers have taken or plan to take maintenance outages.

US suppliers have issued numerous base price increases for HRC, taking recent offer levels to the $1,200/st ex-works level. Service center sources say they have been avoiding these spot offers, especially if they have index-based contracts which were done at a 5-7%.5% discount.

Service centers have instead been focusing on controlling inventories due to rising interest rates and other macro-economic headwinds.

One Midwest service center source said April 18 he was continuing to sit outside of the spot market aside from his contractual tons.

"The writing seems to be on the wall the next price move is down," he said.

Another Midwest service center source said: "I've not been active buying from new production at today's close-to $60/cwt numbers; that level doesn't make me competitive against imports that I'm facing on a regular basis."

Competitive import offers have been heard out of South Korea and Brazil. However, with longer lead times out to the late third quarter, buyers have been unwilling to place those orders due to the uncertainty of domestic pricing, with some leery of the market being near a peak.

Although spot trading remains thin, prices have gained $475/st since the start of the year, hovering at their current level since the start of the month.

Platts April 18 assessed the daily TSI US hot-rolled coil index at $1,175/st on an ex-works Indiana basis, unchanged from the previous assessment.

Tightened spot availability, as a result of buyers' heavy focus on contracts, has helped prop up current offer levels, coupled with various mill outages being taken in March, April and May.

Planned maintenance outages at major US suppliers will have pulled approximately 328,628 st out of US production, according to data from S&P Global Commodity Insights.

In addition, the shutdown in November 2023 of Mexico-based supplier Altos Hornos de Mexico has cut off supply from the region into the US, bearing down on an already-tightened spot supply environment. The company's annual rated capacity was typically 3.5 million st.

Adjusted year-to-date production reported by the American Iron and Steel Institute through April 15 was at 24,970,000 st,down 4.4% from the 26,111,000 st produced during the corresponding period a year ago.

The capability utilization rate has also lowered from the previous year, with AISI data showing US suppliers running at 74.4% on April 15, down from 80.3% in 2022.

Market outlook for rest of year

Market participants have cited concerns about the course of spot prices heading into the second half of the year, with some thinking the market is at or near its peak.

"It feels as though despite the constraints still existing in Mexico, now that the outages are for the most part complete, inventories are in line, and we are right back where sentiment was at the end of last year," said one mini-mill source who held an uncertain market outlook due to the sporadic pace inquiries they were receiving.

An integrated producer source, however, said April 18 that his company's demand levels were steady, with their customers minimizing spot buys not due to a bearish outlook but "because of their own uncertainty of the second half."

The same source said his company's customer base had been running inventories at "manageable levels," and only buying what was necessary to run their respective businesses.