Hot-Rolled Coil Market: Contrasting Trends in US and Germany Amidst Global Uncertainties

The Hot-Rolled Coil (HRC) markets in the United States and Germany are experiencing divergent trends as both regions navigate through unique economic landscapes and industry-specific challenges. This contrast highlights the complex nature of global steel markets and the influence of regional factors on price dynamics.

In the United States, the HRC market has been on a downward trajectory, with prices reaching levels not seen in nearly two years. This decline has positioned US-produced HRC more competitively against imports, a significant shift in the market dynamics. The price spread between HRC, and prime scrap has narrowed to a three-year low, indicating potential pressure on steel mill margins. Despite these pricing challenges, there are some positive indicators for the industry. US raw steel mill production saw a 4% increase in May compared to the previous month, suggesting that demand may be holding steady or potentially improving.

The fourth week of July saw a slight decrease in HRC prices in the US spot market, with sheet prices also declining. Current HRC prices are at their lowest since November 2022, although the rate of decline has slowed. An interesting development is the narrowing gap between HRC and tandem products like cold-rolled and coated steel, which are now catching up to the significant decreases seen in the HRC sector earlier this summer.

US steel mills are maintaining a widespread between HRC and tandem products, potentially allowing for further reductions in cold-rolled and coated prices. However, industry analysts suggest that there may be limited downside risk left for HRC prices, as mills may already be operating at or below breakeven for contract tons or large spot deals.

The import scenario in the US is also shifting, with expectations of decreasing imports due to falling domestic prices and short lead times. This could potentially provide some support to domestic HRC prices in the coming weeks.

In contrast, the German HRC market has shown remarkable stability. During the third and fourth weeks of July, prices remained largely unchanged, despite muted trading activity. The market is characterized by oversupply and subdued demand, with most buyers holding sufficient stocks and showing little urgency for new purchases.

The European HRC market, including Germany, is facing its own set of challenges. While prices have remained stable, there are expectations of softening in August, especially in Southern Europe, before showing signs of recovery. The market is anticipating an increase in demand as stocks dwindle and demand strengthens post-summer. However, the recovery is expected to be slow due to a lack of overall end-user demand.

Import offers in the German market have been scarce, with major Asian suppliers having already met their third-quarter delivery quotas. New EU import safeguards have also made buyers hesitant, contributing to a quiet import market.

As per ChemAnalyst, in the US, we can expect HRC prices to potentially stabilize as the rate of decline slows and import competition eases. The market will be closely watching for signs of demand recovery and the impact of raw material price trends on overall HRC pricing.

For Germany and Europe, HRC prices are likely to remain stable in the short term, with a potential for softening in August. However, there's cautious optimism for a gradual recovery post-summer, contingent on the materialization of anticipated demand increase and the effectiveness of new trade measures.

Both markets will continue to be influenced by global economic conditions, trade policies, and the pace of industrial recovery in key sectors such as automotive and construction. Market participants will need to remain vigilant and adaptable in this dynamic environment.