FEATURE: HRC contract negotiations for 2025 lag; anticipated carryover of 2024 discounts

US hot-rolled coil sources largely expect the carryover of contractual discounts with domestic mills due to delay in annual negotiations.

Discussions regarding 2025 contractual commitments are ongoing, with some sources opting to postpone settling discounts for the upcoming year, as there are fewer concerns about securing inventory compared to previous years.

"I'm hearing from a bunch of people that they aren't in a hurry to settle," a trader said. According to him, some service centers are well-enough supplied until February.

The source said he had just settled his first two contracts earlier in the week ending Nov. 8 and did not expect all of them to be settled until later next week.

Several service center sources said they had enough stocks until the first quarter of 2025, while one service center source based in the US South said he had heard his "competitors [are] not really needing much steel until Q2."

In terms of specific discount levels, market sources said discussions have started at a carryover from 2024 levels at 6%-6.5%.

One Midwest service center source said he was just getting into his contract discussions. His suppliers were talking about a roll-over of discount rates at 6%, while he was pushing for something in the range of 6%-8%.

"Not seeing anyone expect any changes on contracts," a second Midwest service center source said. "Pretty much right now just roll forward and debate the volume," he added.

The trader noted that, despite the prevailing sentiment, market participants were not in a rush to settle on contracts, there might be a limit on the discount mills are willing to offer given current domestic prices. "Pricing on all products is about as low as it is going to get," the trader said.

Platts, part of S&P Global Commodity Insights, assessed US HRC on Nov. 6 at $700/st on an ex-works basis, unchanged from Nov. 5, but down $30 on the month. In fact, prices have traded in a relatively narrow band of $35/st since Aug. 1 throughout the typical time period when contracts are discussed and are just $55/st higher than the year-to-date low of $645.

This trend was similar in the previous year-ago period and in 2022 when prices traded relatively close to their year-to-date low close to contract negotiations.

Looking ahead to the rest of the year, sources continued to express uncertainty about the trajectory of spot pricing amid a prolonged period of weak spot demand. However, some anticipated a greater clarity as the implications of the Nov. 5 election begin to unfold.