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.
Demand remains the primary driver of falling prices in the U.S., especially with inventories heavy heading into 2025. Over the past month, HR Coil futures for 2025 have continued to fall as the physical market remains weak due to seasonally slow demand.
Inventory levels and low demand weigh on the U.S. sheet market
Demand weakness has allowed for another monthly fall for U.S. sheet prices, especially during a time when more capacity is being brought online. Prices were unchanged in Mexico, although market participants are becoming increasingly cognizant about new tariffs put in place by the incoming Trump administration in the U.S.
U.S. HR coil prices were down for a third month in a row in December. Our second weekly assessment of the month fell by $8 /s.ton m/m to $668 /s.ton. CR coil prices were down by $6 /s.ton mm to $910 /s.ton, while HDG coil base prices fell by $12 /s.ton to $865 /s.ton. Spot transaction activity for HR coil was low this week as buyers remained wary of purchasing additional volumes on top of their contracts amid high inventory levels.
End-use demand has remained weak over the past month. While there is a seasonal factor to this, some market participants report that they are running very limited shifts and that orders from end users are only half of what they see during a typical month. Even sectors that have been bright spots this year, like solar energy, have slowed in recent weeks. This demand weakness has forced sellers to continue offering discounts from their published price levels into the spot market as they look to secure deals. It has also kept lead times relatively short (see chart). However, buyers said that some mills are becoming stricter on how steep of a discount they are willing to offer, with exceptions only being allowed for major volume purchases.
With this reduction in demand, and because mill discounts still generated some market activity, inventory levels have risen too high in recent months. Service centers will need to work through these before they return to the spot market in a meaningful way, especially if demand remains subdued. At present, it appears that this will take some time, with many in the market reporting a continuation of demand weakness into January (similar to what has been seen in December). At the same time, there will be more supply from newly installed capacity like Big River Steel #2 to service a rebound in demand once inventories are clear.
HR coil lead times remain relatively short heading into December
U.S. Midwest HR coil lead times, weeks
CME Group Summary
Over the past month, HR Coil futures for 2025 have continued to fall as the physical market remains weak due to seasonally slow demand.
Futures market continues to discount high mill offer prices
At the end of 2024, as the following chart shows, the futures market was pricing in an annual average price of $918 /s.ton for 2024, which was slightly higher than the 2023 settled price of $901 /s.ton.
Looking ahead to 2025, the futures market is now pricing at an average of $779 /s.ton after these futures prices fell by an average of $25 /s.ton over the last month. The largest drop came about for January and February, with prices in these near-term months down by an average of $48 /s.ton.
This price weakness primarily stems from physical prices remaining well below official mill price announcements. Mills have been offering HR coil at $750 /s.ton, yet actual transactions remain heavily discounted due to slow demand while supply remains plentiful. At CRU, we expect sheet demand to rebound in 2025 alongside rising industrial production. However, the continued ramp up of new EAF facilities will limit price gains unless there is a disruption in supply or sudden improvement in demand. Regardless, the futures market continues to offer an opportunity to buyers or sellers that desire to lock in the current forward curve.
Futures market was overly optimistic last year, can the same be said for 2025?
Year-ahead futures in Dec 2023 vs. settled price, $/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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