Market Commentary

Since mid-August, the Midwest assessed price has been stable around $800. That price was supported by a Houston price above $700 and the trend of lower import arrivals, which restricted options for already reluctant buyers. However, this dynamic changed last week, and it will put pressure on the mills to further reduce production or quickly compete with significantly lower prices from abroad. The chart below shows all sheet import data, beginning in January 2017 with the dotted line representing the 12-month moving average.

After September import arrivals briefly fell to the lowest level since April 2021, the preliminary data suggests a sharp rebound back up to 1M tons-per-month and just below the moving average. On its own, this more than replaces the gap created by the recent domestic production cuts and furnace idling, but it is even more of a significant signal when considering the price of these arrivals. The chart below shows the Midwest domestic HRC price in dark blue and the Houston delivered HRC price in orange.

As the chart shows, the Houston price does not update as frequently as Midwest assessed pricing, but last week the price fell 9.7%, down to $650. This is important because the Houston price is a good representation of the import delivered price. While there are exceptions, the Midwest price tends to converge with the Houston delivered price. If there are no further shocks to the supply and demand dynamic, we anticipate the two prices to converge closer to the current Houston price.


Upside Risks:

  • A sudden dovish shift in financial policy leading to less aggressive rate hikes
  • Strategic outages overshooting and causing production to fall below demand levels
  • China reopening its economy with further stimulus measures
  • Energy issues abroad curtailing global production
  • Easing supply chain restraints and labor shortages causing an increase in activity

Downside Risks:

  • Economic slowdown caused by increasing interest rates and sustained restrictive policy from the Federal Reserve
  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Increased domestic production capacity leading to an increase in competitive pricing
  • Sustained levels of import arrivals keeping pressure on domestic mill pricing
  • Limited desire to restock and persistently short lead times causing a “Buyer’s Strike”

HRC Futures

The Platts TSI Daily Midwest HRC Index was unchanged at $760.

The CME Midwest HRC futures curve is below, with last Friday’s settlements in white. The curve continues to be under significant pressure with the 4Q22 and 1Q23 both trading below current spot prices.

The 2nd month ferrous futures were mostly lower, with Midwest busheling down 5.1%, while Aussie coking coal continues to buck this trend, up another 3.6%.

Global flat rolled indexes were mostly lower again, led by Antwerp HRC, down 7.5%, while Black Sea HRC was up 7.1%.

The AISI Capacity Utilization was down sharply, 1.8% to 75.3%.

Imports & Differentials

October flat rolled import license data is forecasting an increase of 204k to 981k MoM.

Tube imports license data is forecasting a decrease of 83k to 476k in October.

October AZ/AL import license data is forecasting a decrease of 41k to 59k.

Below is October import license data through October 10th, 2022.

Below is the Midwest HRC price vs. each listed country’s export price using pricing from SBB Platts. We have adjusted each export price to include any tariff or transportation cost to get a comparable delivered price. Differentials increased for China, Korea and Europe but fell for Turkey.

Global prices were mostly lower this week, led by Northern European HRC, down 6.8%.

Raw Materials

Raw material prices were mixed this week, with Aussie coking coal up 3.2%, while East Coast shredded was down 1.7%.

Below is the iron ore future curve with Friday’s settlements in orange, and the prior week’s settlements in green. Last week, the entire curve was lower, much more significantly in the back.

The ex-flat rolled prices are listed below.

Chinese Inventory

Below are inventory levels for Chinese finished steel products and iron ore. HRC and Rebar inventories both increased significantly, while 5-city and iron ore ports inventories continued to destock.

Economic Data

The remaining significant economic data is below.

Base & Precious Metals

Base and precious metal futures were mixed last week, with silver down the most, 10.8%. The most significant base metals mover was LME Nickel, which also lost 3.2%, while CME copper gained 1.1%.


The U.S. dollar was up another 0.56 to 113.31, while the Australian dollar lost 2.8%.


Last week, the November WTI crude oil future lost $7.03 or 7.6% to $85.61/bbl. The aggregate inventory level rose 0.9%. The Baker Hughes North American rig count increased by 8 rigs, and the U.S. rig count increased by 7 rigs.


The U.S. 10-year yield was up another 14 bps, closing the week at 4.02%. The German 10-year yield was up another 15 bps to 2.35%, while the Japanese 10-year yield was unchanged at 0.25%.


Below are equity indexes and steel related companies:

The list below details some upside and downside risks relevant to the steel industry.  The bolded ones are occurring or highly likely.

Upside Risks:

  • Inventory at end users and service centers below normal operational levels
  • A higher share of discretionary income allocated to goods from steel-intensive industries
  • Changes in China’s policies regarding ferrous markets, including production cuts and exports
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Energy issues abroad curtailing global production
  • Easing labor and supply chain constraints allowing increased manufacturing activity
  • Mills extending outages/taking down capacity to keep prices elevated
  • Global supply chains and logistics restraints causing regional shortages
  • Fluctuating auto production, pushing steel demand out into the future
  • The threat of further protectionist trade policies muting imports

Downside Risks:

  • Increased domestic production capacity
  • Elevated price differentials and hedging opportunities leading to sustained higher imports
  • Steel consumers substitute to lower cost alternatives
  • Steel buyers and consumers “double ordering” to more than cover steel needs
  • Tightening credit markets, as elevated prices push total costs to credit caps
  • Supply chain disruptions allowing producers to catch up on orders
  • Limited desire to restock at elevated prices, causing a “Buyer’s Strike”
  • Economic slowdown caused by the emergence of Coronavirus Variants
  • Reduction and/or removal of domestic trade barriers
  • Political & geopolitical uncertainty
  • Chinese restrictions in the property market
  • Unexpected sharp China RMB devaluation