Mills in the U.S. were able to successfully fill in order books and extend out lead times over the past month using attractively priced offers for high-volume deals. As such, spot prices have risen over the past month, particularly for HR coil. Prices in Mexico followed the trend set in the U.S., but mills in Brazil were unable to capitalize on steady demand because of imports.  

Our second weekly assessment for HR coil FOB Midwest came in at $860 /s.ton, which is an increase of $105 /s.ton m/m. While CR coil and HDG coil prices did rise, these increases were substantially less than that for HR coil. We assessed CR coil at $1,155 /s.ton this week and HDG coil at $1,151 /s.ton, up by $21 /s.ton and $19 /s.ton m/m, respectively.

A spate of heavy buying that was prompted by discounted mill offers has come to an end. Mill order books filled in comparison to where they were in early March, and lead times extended by 10% from 4.9 weeks to 5.4 weeks for HR coil, according to data collected by Steel Market Update. This allowed for mills to push for price increases over the past month, and sheet prices on average have now risen by $48 /s.ton m/m. Most of the increases were for HR coil, although this product also fell the fastest since the beginning of the year. Still, the spread between it and downstream products remains abnormally high (see chart). This rising price spread was driven by some production issues at key CR coil producers as well as an increase in HR coil supply from newly installed capacity.

Market participants say that demand is steady but not necessarily strong. There have been some production issues that have impacted buyers’ ability to procure CR coil, although more recently some have reported that these issues have been getting better. There are ongoing maintenance outages as well in April, which has helped keep supply tighter than in prior months, but these will end and most market participants reported they do not expect to see an uptick in demand to offset more supply that enters the market. As such, it is likely that sheet prices are at or are near a temporary peak.

CR coil premium over HR coil has expanded immensely in 2024, but is now narrowing

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HR Coil futures rose in late March with the May contract briefly surpassing $1,000 /s.ton. Yet, the tide has turned and all contracts are now lower m/m with May down to $850 /s.ton.

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Our last analysis of HR Coil futures was based on information from March 11. At that time, physical sheet prices were reaching a bottom as multiple mills announced price increases. The futures contracts had all started to rise for the balance of 2024 as well as 2025. The largest uplift in futures prices could be seen in the May contract, which briefly surged to just over $1,000 /s.ton in late March. Today, with analysis for this report based on trading data from April 8, the May contract and all other contracts through 2027 are now lower than these late March levels. In fact, the May 2024 contract was down to $850 /s.ton.

This initial price surge was likely driven in part by short covering where futures participants had sold futures contracts short and needed to cover or buy the contract to close it out. These buys often provide temporary price support. Continued buys of the May contract led to the price surge at a time when physical buyers were still able to procure HR coil from mills with May delivery below $800 /s.ton. Further, it is likely that some of these physical buyers had financially sold this material forward in May to lock in the arbitrage offered between the financial and physical market of as much as $150 /s.ton. If this is the case, we expect that any material purchased physically and sold forward will enter the service centre resale market in May.   

Futures prices as of April 8 show an average of $838 /s.ton for 2024 H2, down slightly from $857 /s.ton on March 11, yet nearly the same level from early February. This takes the full year average to $862 /s.ton versus $901 /s.ton in 2023.   

March futures gains have reversed

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