October Brings Optimism and Price Increases in HRC Markets in the USA and Germany

The Hot Rolled Coil (HRC) market has been experiencing contrasting trends in Germany and the USA as October unfolds. In Germany, the HRC market initially faced a downturn at the start of the month, approaching its lowest point due to oversupply, weak demand from end-user sectors, and sufficient inventories. However, a significant shift occurred on October 3rd when European steel producers, including those in Germany, raised their HRC offer prices amid increasing costs. The German spot market saw a 3% increase in HRC prices during the first week of October.

This upward movement in German HRC prices is attributed to rising production costs and optimistic signals from China's recent stimulus package. However, the market remains at a turning point as consumption levels stay low. The HRC market in Germany is expected to gain more clarity in the coming weeks as public holidays conclude. Notably, imports into Europe have remained quiet due to holidays in Asia and face challenges such as trade restrictions, long lead times, and relatively high prices.

In contrast, the USA HRC market has shown a different trajectory. U.S. HRC prices experienced a slight increase by 0.4%, positioning them marginally above offshore material on a landed basis. Since late August, domestic HRC prices have gradually moved higher, supported by steady gains in the U.S. market. The latest market assessment indicates a rebound in average domestic HRC prices from a recent low in July, with a significant rise over the past ten weeks.

Currently, domestic HRC in the USA is more expensive than imported alternatives, reflecting a shift from earlier months when domestic products were cheaper. This trend continues despite a decline in domestic raw steel production, which reached its lowest levels since early last year according to the American Iron and Steel Institute (AISI).

The capacity utilization rate for U.S. mills fell to 74.1%, down from 76.9% the prior week and lower than the 74.4% recorded at the same time last year. Year-to-date production reached 66,212,000 short tons, with a capability utilization rate of 76.7%, reflecting a 1.7% decrease compared to the same period last year.

As per ChemAnalyst, the HRC market is expected to navigate a complex environment in the coming months. In Germany, the recent price increase may face challenges if consumption remains low, but trade restrictions could support domestic prices in the longer term. For the USA, the gradual rise in HRC prices might continue if domestic production remains constrained, but this could be tempered by global market dynamics. Both markets will likely be influenced by factors such as energy costs, raw material prices, and overall economic conditions. Manufacturers and buyers should remain vigilant to these evolving trends and potential shifts in supply-demand dynamics across both regions.