US domestic HRC and rebar markets are expected to remain stable in March with downward pressure on pricing increasing in April as China recovers from the initial Covid-19 slowdown. Shipping lines are recovering with Chinese origin exports beginning to flow into all destinations, especially, those with less trade barriers. China also recently issued a series of export tax rebate facilitation measures to speed up business after over a month of shutdowns across the country due to the virus.
Despite the import barriers in the US, given the downward pressure on rebar and HRC beginning in Asia and eventually affecting global trade steel prices, US domestic prices are expected to decline on lower import offers.Import supplies from countries with easier US market access could reroute their previously intended domestic products on tighter local competition. Additionally, Chinese produced supplies could find themselves on US shores via countries with circumvention loopholes.
As buyers wait for clearer market conditions, the terms “hesitant” and “wait-and-see” were used widely among those contacted by Davis Index. The potential uptrend of $10-20/gt on ferrous scrap prices in the US domestic March trade, which would normally factor into supporting finished steel price outlooks, could be offset by buyers slowing replenishment and factoring in the expected price declines on finished steel as Chinese exports begin to flow. The effect into the US market is expected in Q2 2020.
HRC mill lead times are now at five to six weeks with prices at $550-580/nt($606-639/mt) fob mill. Mill offers are at $580-600/nt ($639-661/mt) fob mill. Deals for large quantities are being indicated in the at $540/nt ($595/mt) fob mill. HRC prices declined $40-50/nt ($44-55/mt) compared to mid-January transactions.
Rebar is trading at 29-31¢/lb ($580-620/nt, $639-683/mt) fob mill, down from 34¢/lb ($680nt, $749/mt) fob mill, a decline of $66-110/mt in the past two weeks. As recently as February 24, rebar prices were at 32-33¢/lb ($640-660/nt, $705-727/mt) fob mill in the Midwest and East Coast. Domestic prices rebar are comparable to import prices and several buyers reported that at the moment inventories in US ports are adequate with no excessively discounted offerings.
Given the expected pricing pressure, replenishment will be slow through March until impact can be better assessed. Several rebar fabricators reported a slow business environment on overall market uncertainty and slow construction activity on winter seasonality.