Negotiations for the August US domestic ferrous trading cycle began on Wednesday, as mills across the country issued price announcements. In the Midwest and South/Southeast, there has been a generalized trend showing prices for prime grades and P&S 5ft, while shredded and machine shop turnings (MST) and HMS I prices are being pushed down by $20/gt. Negotiations are ongoing, and prices are not settled yet. This is aligned with expectations in the past weeks, with the possible exception of mills trying to contract HMS I prices by a deeper margin.
There is a generous amount of shredded in the US; most contacts agree with that, yet some are perplexed by their desire to lower HMS I by $20/gt. From the outset, in markets like Detroit, the spread between cut grades HMS I and P&S 5ft will widen significantly. If the current price announcements hold after negotiations, HMS I would drop in that market to $355/gt delivered consumer and P&S 5ft would remain at $400/gt delivered. A $45/gt spread when $20/gt is more common.
The latest reported stance by sellers in the Midwest is that they will issue offers for HMS I with a $10/gt price decrease on HMS I at most, while some are thinking a sideways scenario for the grade is not out of the cards. Flows of HMS I nationwide are not as healthy as shredded, they say, with some venturing to say that they are actually tight. By Thursday afternoon, confirmed sales are still not being reported in the Midwest.
As far as the reasoning behind mills looking to push HMS I so much, the opinions have been diverse. Since HMS I and shredded are prominent in the manufacturing of long steels, some have pointed out that the price of rebar has not been performing as well as hot-rolled coil's (HRC) price. The price of rebar in the US fell to $919.8/nt FOB US mill from $949.8/nt FOB at the beginning of June. In comparison, HRC's price has risen to $1,174/nt ex-US mill from $1,106/nt ex-mill during the same period.
It should be noted that some participants have mentioned that steel customers do not follow cut grades as closely as they do prime grades. Hence, the common perception is that HRC is more closely linked to #1 busheling's performance, resulting in mills closely guarding prime grades' pricing so they do not affect their steel selling prices. Additionally, as HMS I is not generated as constantly as industrial grades such as #1 busheling, it is subjected to seasonal trends such as activity changes in construction and demolition. Some also add that due to the grade's inherent inconsistencies, it is not bought by several mills, allowing those that do buy it to try and exert heavy influence on the grade's market.
In the meantime, there have been confirmed sales as of Thursday afternoon coming out of the Southeast. A sideways trend is being seen for prime grades with a -$10/gt on everything else. On some deals and in some markets, there are reported sales of P&S 5ft being sold at sideways prices from last month, while in other reports the price was reduced by $10/gt.
West of the Mississippi, the report is that some mills announced a sideways trend across the board. This also coincides with the latest announcements seen on the US East Coast (USEC), where mills in the Philadelphia market are seen purchasing all grades unchanged from July's settled prices. Buyers in Philadelphia stated that they already dropped $10/gt last month on all grades (except prime grades) when only shredded and HMS I's prices contracted.
But it could also be that the export market on both coasts has picked up recently. In USEC, the price of HMS I/II 80:20 has improved to $375-376/mt CFR Turkey from $369/mt CFR a couple of weeks ago. It is still not sure that this upward trend will be sustainable yet; USEC exporters are reportedly firm on their offer levels as of Thursday. In the meantime, the prices to USEC docks rallied on Tuesday as HMS I increased to $260-265/gt delivered Philadelphia export yard from $245-250/gt delivered the week prior.
Negotiations and sales for the domestic market are still developing across the country.
