The psychology of the hot-rolled coil spot market may be turning in favor of steel buyers as there are signs that prices in the US are feeling some downside pressure. Several deals reported to Platts late Wednesday and Thursday reflected that the price of HRC was off at least $10/st to a range of $550-560/st, ex works Indiana, or a midpoint of $555/st, for 1,000-3,000 st orders.
The previous high-end of the range – $570/st – is now being quoted for smaller orders of about 500 st. And there were even some one-off, bargain deals reported in the $520-540/st range, but these were for big tonnage orders in excess of 10,000 st, in some cases.
One big indicator – scrap prices in the US – declined for the second successive month this week, dropping by more than $60/long ton, on the heels of a scrap-price decline last month of at least $40/lt. With mills seeing some scrap-cost relief, steel consumers are anticipating the same. Another key factor, demand from end-users in the US, is frail. In fact, 72.2% of respondents to the ISM's Steel Buyers Forum April survey described inventory levels as "too high compared to demand." That level of response represented a 12-month high.
"I'm getting phone calls [from mill salespeople] asking if I need more steel for May," said one major US service center. "So you know they still have room to book you." The US mill lead times have been consistently short, "sometimes two to three weeks for hot-rolled coil," noted an international trader on the US Gulf coast. "Order books cannot be strong."
Far shorter delivery times than that are also being heard. "If I tell the mill rep I'll give you a 5,000-ton order, but I need 2,000 tons in five to seven days," claimed a buying source with a major pipemaker, "they will make it happen – especially the minis. They can switch you with someone else and do some nimble things."
The soft orders reflect, according a number of sources, the lack of strength from key demand drivers. "US GDP growth is so-so, the auto market is lousy, and housing's just plain bad," said the pipemaker. "Almost all the major sectors are down," added the same trader, who excepted the energy sector and some agriculture segments. "Lawn and garden equipment – -riding mowers and such – are doing well," noted the service-center buyer, "as is most of the oil patch."