The sheet market in North America has come under pressure from a combination of rising supply availability and slowing demand. As a result, U.S. sheet prices have fallen by an average of 8% m/m, while those for HR coil in Mexico fell by 5%. While Brazilian demand has also been subdued, it has been stable enough to prevent price falls m/m.

Our second weekly HR coil price assessment for June came in in at $746 /s.ton, down by $66 /s.ton m/m. HDG coil base prices took the largest m/m hit, falling by $129 /s.ton to $990 /s.ton, while CR coil prices fell by relatively less, declining by $46 /s.ton to $1,070 /s.ton.

Supply continues to outpace demand in the U.S. market during June. Market participants report that deals are still being cut for large orders and that mills still have extra material they need to place. In some cases, material is making its way from the U.S. Midwest all the way to the West Coast as sellers look to fill in order books. Buyers said that they are not looking to stock up on inventory, and while they might strike a deal for discounted material in the spot market, they are largely living within their contracts. Meanwhile, U.S. Department of Commerce data show that May imports for flat products (excluding cut-to-length plate) hit their highest level since August 2022.

The impact of a supply surplus is particularly visible in HDG coil prices, and yet more upcoming capacity is likely to drive them down further still. Since peaking at $377 /s.ton in mid-March, the premium of HDG coil base prices over HR coil prices has declined to $244 /s.ton this week. Meanwhile, zinc prices have risen substantially this year and a number of mills have increased coating extras as a result. Our assessed coating extras for G90 on a 0.06” substrate rose this week from $80 /s.ton to $85 /s.ton, but mills are adjusting HDG coil base prices lower so the impact on all-in prices has therefore been more than offset.

Concurrently, demand has weakened this year and market participants report that outbound shipments to most end use sectors has slowed meaningfully. This demand downtrend can be seen in macroeconomic data, with U.S. Industrial Production remaining in negative territory y/y since Q4 2023, and U.S. domestic automotive production (seasonally adjusted) falling in April 2024 to its lowest level since September 2021, according to the U.S. Bureau of Economics.

Some key end-use sectors are showing signs of slowing or decline this year

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Prices in the HR Coil futures market continue to fall, reflecting a battle for market share between regional mills as rising capacity and lower costs meets with limited demand growth.

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The current environment of rising capacity and limited demand growth has forced mills to get aggressive as they attempt to fill order books. The futures market has followed this downward trend in physical prices with 2024 Q3 contracts down 7.9% m/m while prices in 2024 H2 are lower 5.5% m/m. As of this past Monday, the 2024 H2 futures price on CME Group was at an average of $780, down from $825 /s.ton last month and $844 /s.ton in early January.

Like last month, Nucor has published their CSP (consumer spot price) at a heavy discount ahead of the second Wednesday of the month. In May, they lowered their weekly asking price by 7.9% and this month, prices were cut by 7.7% from the prior week. In May, their aim appeared to maintain the competitiveness of their prices with discounted contracts that would reprice lower in the following month. Cutting prices early would allow them to remain consistent in booking orders today, rather than wait for contract orders to be placed in the following month once prices reset. This again seems to be the case in June as discounted July contracts will fall based on CRU’s June 12 U.S. Midwest HR coil price. 

However, it does seem possible that Nucor’s attempt to avoid a pause in buying may be leading to lower prices. Their offer of $720 /s.ton may now be seen as a price ceiling and as spot buyers negotiate for volume in the coming weeks, we may again see further falls in spot transactions in July, which would then lead to lower contract prices in August. If this hypothesis is correct, it would suggest we are likely to see physical HR coil prices fall below $700 /s.ton, leading to further price declines in the futures market. Further, with scrap prices falling below $400 /l.ton in June, it allows EAF-based mills to remain competitive with BF-based mills in offering HR Coil products. Perhaps there is a battle for market share taking place due to rising capacity, limited demand growth and falling costs. 

Futures pricing in a summer low before a stronger 2024 Q4

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