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US HRC prices disconnecting from rest of world, inviting imports

Highlights

US HRC's surge has pushed it well above global levels

Import arrivals picking up and more expected

Domestic mills have imports on radar

US hot-rolled coil prices have surged by more than 300% since August 2020 and continue to set all-time high prices on an almost daily basis. Even as global prices rallied throughout much of the year they have failed to keep pace with the US market leaving the door open for an increase in imports.

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Nearly a year ago, US HRC prices were at a discount to other regions like Northern Europe, Turkey and even China. As the recovery from the onset of the pandemic moved across regions, the US, which was one of the last locations to shutdown from the virus, was also the last to begin to rebound.

The extremely low US HRC prices in July 2020 in the mid-$400s and depressed market conditions even brought back the discussion of US mills exporting coil to the rest of the world. Now the daily Platts TSI US HRC price sits at a massive premium to the rest of the world, pushing $1,000 in some cases at $1,824.75/st on an ex-works Indiana basis as of July 15.

US sheet imports in May hit their highest level since January 2019 totaling more than 750,000 st, according to data from the US Department of Commerce. HRC imports accounted for 232,071 st of total sheet imports, the highest monthly total since October 2018.

Market sources said they expect robust import price levels to continue or rise during the summer as more material booked in the spring starts to arrive at US ports. In addition, buyers continue to be active booking imports for fourth quarter arrivals, despite rising prices, as domestic mill lead times remain extended.

Recent deals for Turkish HRC set to arrive in October were $1,580-$1,620/st on a DDP Houston basis before the cargo sold out. Now the spillover in demand is helping to push prices for November arrival up to $1,640/st DDP Houston.

Traders were also marketing Egyptian HRC with October arrival. One southern US service center source recently bought from the offering at $1,620/st DDP Houston for 3,000 st.

While Turkey and to a lesser extent Egypt have been active exporting HRC to the US, the widening gap between global prices has led to opportunities for less frequent players. Market sources said Vietnam was now an option for HRC, despite the country previously exporting mostly downstream products to the US.

Since 2018, Vietnam has exported about 25,000 st of HRC to the US. However, the country is expected to have arrivals pick up in the fourth quarter with one distributor already marketing a list of HRC from Vietnam with arrival around October.

"I hear that there are two Vietnamese mills making offers now and that it is quite a bit of tonnage," said one sell-side source.

As buyers' import options continue to grow he expected US sheet mills to start to factor the price levels into their commercial approach. "On rebar or beams, the domestic mills have a long history of doing import fighters type of pricing. At some point, they will be receptive to doing something like that on flat-rolled," added the source.

A southern US mill source was also keeping a close eye on the import activity: "The amount of imports being offered is on our radar. It seems like the offerings are more frequent but I'm not clear on the actual volume being offered."