U.S. sheet price gains continued at an accelerated rate over the last month, with prices across all products on average now up by $218 /s.ton m/m. These increases were driven by extremely limited spot availability at a time when buyers decided to pull forward their year-end orders, giving sellers control over spot pricing. Meanwhile, prices in Brazil stopped falling on announced production cuts and relative demand stability.

Our second weekly HR coil assessment for December in the U.S. Midwest market is now at $1,067 /s.ton, up by $23 /s.ton w/w and by $214 /s.ton m/m. Value-added products were up by similar amounts m/m, with CR coil rising by $210 /s.ton to $,1301 /s.ton and HDG coil base prices rising by $230 /s.ton m/m to $1,303 /s.ton. These were up by $39 /s.ton and by $46 /s.ton w/w, respectively. Volumes this week were higher than those in prior weeks, although they remain low compared to what we typically see.

According to market participants, lower-priced deals were done to fill holes in select mill order books for January, although this availability is extremely limited now.  By and large, buyers are staying away from the spot market, and are planning to minimize contract volumes as prices rise after maxing them out in November. There is still plenty of material on order heading to service centers and market contacts also report that material ordered in October and November will be arriving in the coming weeks. Some buyers have noted that imports from Europe are also expected to start arriving soon.

At the same time, end-use demand is seasonally slow, and some data now point toward a balance in automotive inventory levels. The upward trajectory of U.S. prices appears poised to slow once the market slackens in coming weeks. We are seeing the start of this trend now. Lead times as collected by Steel Market Update show that HR coil lead times have fallen for the first time since mid-September and that mills’ willingness to negotiate on price has increased in early December. Still, the spot market will remain tight over the near term and the probability of another mill-announced price increase is high.

HR coil lead times fell in early December while negotiation willingness rose
LHS: HR coil mill lead times,
RHS: RHS: Mill willingness to negotiate on HR coil prices, %

  Back to Top

Prices of HR Coil futures contracts at CME Group have followed physical prices higher, yet they have started to discount further gains in the near term.

  Back to Top

Prices on the CME Group’s HR coil forward curve have continued to increase alongside rising physical prices. At the market close on December 10, the forward curve reflected an average price of $1,067 /s.ton for Q1 2024, an increase of $60 /s.ton since our last review of the market on November 6. Prices in Q1 2024 are the only prices that increased m/m as prices from April through December fell. For 2024 as a whole, prices now reflect an average of $918 /s.ton.

The current shape of the forward curve is backwardation, meaning prices in the future are cheaper than near term prices. The most recent data has HR coil prices peaking at just over $1,100 /s.ton in January before falling 25% to $842 /s.ton by the end of 2024.

The shape of the current forward curve is aligned with CRU’s forecast where we expect prices to peak in early Q1 2024 before sliding back towards more normalised levels in H2 2024. While we expect prices to fall further throughout the year, we also expect at least one more mill price increase in the near term. We expect 2024 to be a year where supply growth outpaces demand growth. This is in part due to the ramp up of new EAF mills while industrial activity remains somewhat muted. Yet the steel market is often volatile and physical prices can quickly shift higher or lower as the perceived balance of supply and demand shifts.

CME futures price in a 25% decline after January peak
LHS lines: CME HRC contract prices, $/st
RHS bars: Open interest, contracts, st

  Back to Top