Fundamental Report
Supply-Side Takeaway:
Imports and domestic production remain on a downtrend, while the domestic – global differential remains (slightly) negative for the 6th straight week. The downside risk from current levels remains limited, however, muted demand and elevated existing inventories will take time to overcome.
Imports and the Domestic – Global HRC price differential increased for the fourth consecutive week, although remains negative. The move was the result of the domestic spot price rising further, while the global average price continues to slip. On the imports side, preliminary data for July indicates arrivals rising to just above 900k, a notable jump from June’s final census data, which was marginally above the long-term average. Finally, domestic production retreated further, ticking down for the second consecutive week.
HRC Spot Prices – US Domestic & Global
- The global HRC spot price declined to $666 from $670. This dip was mainly due to a -$7 in China, a -$6 in Europe, and a -$5 in Korea.
- The Domestic – Global HRC spread expanded further, widening from -$14.81 to -$1.44, though remains
Total Sheet Imports (s.ton)
- This week’s imports estimated sheet arrivals for July indicate an increase from June’s easing, rising to 904k tons from June’s final census figure of 825k.
- Given the current negative differential, it is highly unlikely that we would see another surge in arrivals for the remainder of the year. That said, we do anticipate some volatility in these figures as we push below the longer run “neutral level”.
Domestic Production (s.ton)
- For the week ending on August 3rd, capacity utilization ticked down by 4% to 77.5% and domestic raw steel production declined to 1.722m from 1.729m/tpw.
- This brings the year-to-date production to 52.421m, operating at a rate of 5%, -2.2% below this point last year.