Malaysian and US HRC Prices Reflect Industry Challenges and Government Initiatives

The first week of April showcased a slight price increase in Malaysian Hot-Rolled Coil (HRC), marking a significant shift in the steel market landscape following the government's strategic intervention to address oversupply. However, the industry grapples with excess steel, impacting growth, despite the promotion of green steel technologies. Concurrently, the US HRC market saw a 1.13% price surge, reinstating a domestic price premium over imports, indicating stability amid nuanced supply dynamics. These trends highlight the urgency for strategic solutions to achieve balanced supply and demand equilibrium in HRC, underscoring the industry's need for concerted efforts to navigate evolving market dynamics.

In the starting week of April, the price of Malaysian HRC saw a 0.5% increase, indicating a significant change in the steel market environment because of the Malaysian government implementing a two-year "production capacity suspension order" to address the oversupply of steel impacting HRC inventory. By granting exemptions from decarbonization requirements, this calculated move promotes the development of green steel technologies while giving HRC manufacturers time to reorganize their operations.

In addition, March end week trade data highlights the fragile state of global demand, with steel exports falling by 0.8% year over year compared to an expected 2.4% growth. This highlights the negative effects of excess supply on the industry's capacity to satisfy HRC demand. This highlights the need for the industry to make coordinated efforts to navigate the changing market landscape and emphasizes the urgency of finding strategic solutions to achieve a balanced supply and demand equilibrium in HRC.

Similarly, the US HRC coil market has seen an 1.13% increase in prices entering April outpacing offshore prices, resulting in a revived premium for domestic products over imports. Despite minor weekly fluctuations, US HRC prices have remained relatively stable in March 2024, influenced by Nucor's spot price and Cliffs' price increase expectations.

Data from the American Iron and Steel Institute (AISI) reveals a 1.0% decrease in domestic raw steel production for the week ending April 6, 2024, compared to the same period last year, alongside a 2.4% reduction in capability utilization rate, signalling a nuanced landscape in the HRC market's supply dynamics.

For the week ending April 13, 2024, the weekly U.S. American Iron and Steel Institute's (AISI) most recent weekly domestic production statistics showed raw steel output decreased marginally by 2.40% when compared to the same week the previous year. The percentage of domestic mill capability utilized was 77.7%.

The Malaysian steel market is anticipated to remain stable due to the implementation of the "production capacity suspension order" by the government, although challenges persist such as excess steel supply. Despite exemptions from decarbonization requirements fostering the growth of green steel technologies, increased investment and innovation are needed for sustainable development. Similarly, the US steel market is poised for growth, with a notable shift in the HRC market. Despite marginal decreases in domestic raw steel production and capacity utilization rates, the market is expected to face lower inventory levels of HRC. This may pose challenges in meeting rising demand from downstream sectors, signalling a need for strategic measures to address supply-demand dynamics.