US and German HDG Markets Grapple with Price Declines and Sluggish Demand in July

The Hot Dipped Galvanized Sheet (HDG) market in both the United States and Germany has been experiencing significant fluctuations and challenges during July, reflecting broader economic trends and industry-specific factors.

In the United States, HDG prices saw a notable decline in the third week of July, primarily influenced by decreases in feedstock materials such as Cold-Rolled Coil (CRC) and Hot-Rolled Coil (HRC). The US hot-rolled coil market has undergone a shift in its competitive position relative to offshore suppliers, with domestic HRC prices reaching their lowest point in nearly two years. This decline has made US-produced HRC more competitive compared to imports, a development that could potentially impact the HDG market.

During the fourth week of July, HDG prices in the US spot market decreased by 1.7%, reflecting low global sheet demand and exerting downward pressure on prices worldwide. The sluggish construction activity in the US has contributed to reduced demand for construction metals, including HDG, within the domestic market.

Raw material prices for Hot Rolled Coil (HRC) and Cold Rolled Coil (CRC) also experienced dampened prices during this period. Despite HRC prices being at their lowest point since November 2022, the rate of decline has slowed, with cold-rolled and coated products following suit with significant decreases. Mills have maintained a gap between HR and tandem products, which could potentially lead to further reductions in CRC and HDG prices.

Industry experts suggest that there may be limited downside risk left, particularly for HDG prices, as mills may already be operating at or below breakeven for contract tons or large spot deals. Import levels are starting to decrease, with the anticipation that this trend will continue due to declining domestic prices and shortened lead times.

In Germany, the HDG market is facing similar challenges. During the third week of July, HDG prices experienced a 1.4% decline in the German spot market. The European market for cold-rolled coil and HDG is experiencing a seasonal lull, with market conditions remaining challenging due to weak demand. Key end-user sectors, particularly the automotive and construction industries, are showing reduced appetite for these products, leading to subdued trading activity across Europe.

Steel mills in Europe are facing thin order books, with September delivery slots still widely available, indicating a lack of forward demand for HDG and putting pressure on producers. Some European suppliers are considering potential price adjustments after the summer holidays to reflect increased input costs. However, buyers are sceptical about the feasibility of such increases, citing weak demand as a counteracting factor.

The situation for CRC, a key component in HDG production, is particularly notable in Europe, with mills rarely making firm offers due to high production costs and stiff competition from imports in commodity-grade markets. In fact, the European market for commodity-grade CRC is currently dominated by imported products, highlighting the price disparity between domestic and foreign suppliers.

Looking ahead, the HDG market in both the US and Germany faces a complex set of challenges and opportunities. In the US, the potential stabilization of scrap prices and the decreasing trend in import levels could provide some support to the market. However, the ongoing sluggishness in construction activity and the global pressure on sheet demand may continue to exert downward pressure on prices.

In Germany and broader Europe, the market anticipates a gradual improvement as stocks diminish and demand strengthens post-summer. However, this recovery is expected to be slow, primarily due to a lack of overall end-user demand. The industry will be closely watching for any signs of demand recovery or shifts in the competitive landscape that could alter the current market dynamics.

As per ChemAnalyst, for the upcoming weeks, the HDG market in both regions is likely to remain under pressure, with prices potentially continuing their downward trend or stabilizing at current levels. The key factors to watch will be the recovery in end-user demand, particularly in the automotive and construction sectors, as well as any shifts in global trade dynamics that could impact the competitiveness of domestic producers against imports. Additionally, the evolution of raw material costs and their impact on mill margins will play a crucial role in shaping the market's direction in the near term.