Oversupply Pressures US Cold-Rolled Coil prices, Demand Outlook Mixed in Q4

New Delhi: During the last week of October, US Cold-Rolled Coil (CRC) prices dropped by more than 7.5% as the market lacked price direction. According to manufacturers, Cold-Rolled Coil prices fell as the market remained concerned about logistics. Low water levels make barges much more expensive because shippers cannot load as much weight on a barge. According to the sources, the Mississippi River's water level has dropped to such low levels that barges are becoming stuck, resulting in costly dredging and traffic congestion. Water levels have dropped alarmingly due to the recent drought, causing shipping delays. Furthermore, shippers were forced to limit the amount of cargo their barges could transport to navigate the low water levels safely. As a result, market participants anticipate alternative modes of transportation, such as rail.

Market participants noted that US Cold-Rolled Coil (CRC) prices fell by USD 80/MT and settled at USD 1020/MT. Additionally, the Cold-Rolled Coil had a six-week lead time. Buyers claim that the majority of quotations for Cold-Rolled Coil were between USD 1100/MT and USD 1200/MT.

The integrated steelmaker, Cleveland-Cliffs, plans to increase quarterly production rates by 8–11% in the fourth quarter over the first three quarters of 2022, which averaged around 3.27 million MT. The increased output of Cold-Rolled Coil is expected to be consumed by increased automotive demand, which increased by 109866 MT between the second and third quarters. Nucor reported a 77% utilization rate in its earnings last week in the third quarter. Steel Dynamics, an EAF competitor, had a 93% utilization rate during the same period.

Furthermore, the Cold-Rolled Coil market is still waiting for the outcome of negotiations between integrated steelmaker US Steel and the USW for a new contract to replace the one that expired on September 1st. Many Cold-Rolled Coil players believe that a potential strike is the only way to turn the market around and avoid increased production cuts by steelmakers. US Steel has already shut down two blast furnaces in response to market conditions. Other steelmakers have yet to follow suit.

As per ChemAnalyst, the Cold Rolled Coil prices are expected to fall until mid-November owing to rising oversupply concerns. However, how the market will react to increased flat production is still unknown, as oversupply remains a significant issue, and additional flat-rolled production will ramp up over the next six months. Thus, the Cold-Rolled Coil prices are expected to rise after mid-November due to increased demand in the first quarter of 2023.