HRC Market Faces Price Decline as Subdued Demand Shapes Challenging Outlook

In North America, the Hot-Rolled Coil (HRC) market has been experiencing a sharp decline in prices since the beginning of May, reflecting subdued demand. This has prompted mills to reduce prices to remain competitive, as cautious market players navigate economic uncertainty and a subdued global steel market. With consumers purchasing limited volumes and distributors highlighting a global struggle of increasing capacity utilization coupled with decreasing demand, a prolonged period of low demand is anticipated. These factors cast a shadow on the HRC market outlook, creating a challenging environment expected to persist until the year-end.

In the USA, the 3rd week of May saw a decline in HRC pricing, aligning with competitive import prices from the Asian market. Anticipation of an increase in punitive tariffs on Chinese steel and aluminium imports has led buyers to withhold orders, awaiting stability in the HRC market. Lethargic demand from the automotive sector further impacted HRC market dynamics during this period.

However, in the 4th week of May, the US spot market witnessed a rebound in HRC prices, attributed to augmented interest from mill buyers influenced by Nucor's pricing strategies. Notably, there has been a burgeoning momentum surrounding the demand for green steel, particularly within the automotive and construction sectors in the US. The industry's emphasis on green credentials, driven by the prevalence of electric arc furnaces (EAFs), has provided the potential for commanding premium pricing, resulting in significant deals between domestic mills and auto producers. In the week ending May 25, the US produced 1.74 million net tons of crude steel, a 0.4% increase week-on-week but a 1.1% decrease year-on-year. The capacity utilization rate was 78.1%, up 0.3% week-on-week and 0.2% year-on-year.

Furthermore, during the May month ending period, the spread between HRC and prime scrap prices narrowed, while the average HRC price experienced a modest decline. While the offshore cold-rolled (CRC) coil prices continue to represent a cost-effective alternative compared to domestic options, as US CR coil prices slightly decreased, remaining 19.4% more costly than HRC imports. This period also saw a decline in new car sales due to high interest rates, impacting monthly and yearly figures, posing challenges for the steel market, especially considering the setbacks faced by the global automobile industry in April.

Amidst these market dynamics, a survey by the Associated Builders and Contractors (ABC) indicated a positive expansion of the Construction Backlog Indicator in April, although the Construction Confidence Index reported slight drops in sales and profit margins for the same period. Meanwhile, nickel prices continued to rise due to various factors, with market participants noting the presence of high pure nickel inventories and limited improvement in demand, resulting in potential short-term market volatility.