The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by CRU International. CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.
U.S. sheet prices fall precipitously on high supply availability
The U.S. sheet market has come under immense pressure from rising supply availability. HR coil prices have now fallen by $231/s.ton since last month, but domestic prices nevertheless remain above their average premium to other regions of the world. The two supply-side factors weighing on the market now are more availability from existing and recently ramped-up new domestic capacity alongside an impending rise in import volumes. In combination with a recent surplus in service centre inventory levels, a pause in these price declines is unlikely in the near-term.
In part, these large sheet price declines have been driven by a ramp-up in new domestic capacity. Output issues at one new facility now appear to be mostly resolved, and the facility is able to operate at a much higher capacity than in prior months. At the same time, two other facilities are now offering more material into the market compared to earlier in the year and are getting more competitive in price in order to keep or grow market share. Meanwhile, May import license data from the U.S. Census Bureau show that light gauge sheet imports rose to their highest level since January of this year, with gains in share coming from countries in Asia and Europe that are no longer subject to Section 232 tariffs. Given the immense spread earlier this year between U.S. and international sheet prices, we expect these volumes to increase in the coming months.
Demand is also playing a role in price falls. Market participants report that overall demand has slowed somewhat recently and that they have reduced their orders from mills as a result—especially given expectations that prices will fall further. In a bi-monthly survey conducted by CRU-owned Steel Market Update, 24% of respondents said that demand is declining, which is the highest percent of respondents answering this way since November 2022.
HDG coil coating extras have held at the same level since July 2022
LHS: North American zinc premia + LME cash, $/lb
RHS: HDG coating weight extra G90 .06", $/lb
CME Group summary
Prices of the CME Group’s HR Coil futures contracts have stabilised after falling back from a recent peak reached this past March, leading to a flatter forward curve.
HR coil futures curve flattens
After falling for the past two months from the most recent peak, prices of the CME Group’s HR coil futures contracts have stabilised at slightly higher levels in early June. As of this past Monday, the average price for August 2023 through May 2024 is now at $820/s.ton, up from $801/s.ton in early May.
Due to this marginal increase alongside the rapid decline in spot physical prices, the shape of the forward curve has visibly flattened. While the shape of the curve has flattened, open interest has resumed its upward trend, rising for the seventh time in the past nine months. Current open interest was just over 530,000 s.tons and is higher y/y for the first time in 15 months.
Physical spot prices just nine weeks ago were at $1,203/s.ton for HR coil. With the shape of the forward curve now flatter with an average of $827/s.ton for 2024 through 2025, it may now offer buyers the ability to lock in a known price well below these recent highs. Physical sellers may also find value in locking in some sales, especially for those that are able to properly hedge or control their costs, whether those costs are steelmaking raw materials or are contractually committed finished steel products.
HR futures prices and volumes are marginally higher in early June
LHS: CME HRC contract prices, $/st
RHS: Open interest, contracts, st
The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by CRU International. CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.
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