US plate price at discount to HRC, only third time since 2010

Pittsburgh — US plate prices were selling at a discount to hot-rolled coil prices for just the third time since 2010 with market participants expecting the trend to continue into 2021.

Plate prices have not been able to capture the full momentum of the HRC market due to weaker end-use demand, while coil prices have surged more than 59% since August. US HRC price momentum has outpaced momentum in the plate market.

US plate prices have historically traded at a premium to HRC but limited availability and strong demand for HRC led the spread to finally invert in October after gradually narrowing since August.

Since 2010, plate prices have been lower than HRC on only two other occasions. Once, for a six-month period spanning July 2016 to January 2017, and again in October and November 2017.

Plate market sources are not expecting plate prices to be at a premium to HRC in the near term. Tight market conditions continue to propel HRC prices higher, while the demand outlook for the plate market remains murky.

Plate mills have hiked prices four times since late August to keep pace with rising HRC prices, but were unable to prevent the plate-HRC spread from inverting. In total, the four plate price increases have amounted to $170-$180/st, depending on the producer. Since plate prices bottomed out in late August at $555.25/st on a delivered basis, plate mills have been able to realize over $115/st of the announced increases.

In comparison, HRC prices have gained over $220/st in the same time frame, increasing to $699.75/st on Oct. 29 compared to $475.50/st in late August.

Plate prices have now lagged below HRC prices for over three weeks. Despite the momentum in HRC helping support plate prices in the near term, market sources say the spread will remain inverted through the remainder of 2020.

The spread between HRC and plate has averaged approximately $14/st since Oct. 7, with the spread even wider when the products are compared on an ex-works basis. S&P Global Platts' latest daily TSI US HRC index was $699.75/st on Oct. 29, while the latest Platts TSI US plate index stood at $674.50/st on a delivered Midwest basis.

"The separate supply and demand balance between coil and plate will prevent them from following each other as closely as they historically have," said a mill source, noting that plate prices were unlikely to move higher through the rest of the year without stronger demand. Still, given the upward momentum in the HRC market, the source did not rule out the possibility of higher plate prices.

Following several months of weak demand for plate, a service center source believed market dynamics were unlikely to change until 2021. "I don't see demand for plate kicking in in the next several months," said a service center source. "As far as plate increases, it is strictly correlated with what is happening with coil. Plate is living off coil right now."

Besides pricing, lead times for both products also mirror the current split between the two markets. Average HRC lead times stood at 8.6 weeks on Oct. 28, according to S&P Global Platts data, while plate lead times were nearly three weeks shorter at 5.9 weeks.