Market Commentary

Over the last two months, galvanized (HDG) prices have been weaker than hot-rolled (HRC), causing the historically high HDG-HRC differential to push down below $400 for the first time since early November 2021. The chart below shows the weekly prices for Platts HDG minus HRC, along with the 5-year average (before 2021).

The chart below is the 5-week-moving average of the weekly percentage changes for both HRC (blue dashed) & HDG (orange). This helps visualize pricing momentum between the two products over the same period.

Last week (ending in 9/9), the 5-week-moving average for HRC printed higher for the first time in 18 weeks. This epitomizes the shift in sentiment from the mills, where they are attempting to support spot index pricing for HRC near $800 but are willing to negotiate lower prices on HDG and tandem products because of the increased embedded profits. The chart also provides some perspective on how significant the selloff was for HRC compared to HDG, which led to the historic spreads in the first place. Looking forward, we anticipate the spread between the two to continue to converge, as domestic mills show more willingness to negotiate pricing with tandem tons that still provide higher levels of profitability than HRC.


Below are the most pertinent upside and downside price risks:

Upside Risks:

  • Reluctance in placing import orders, leading to a dramatic reduction in arrivals
  • Unplanned & extended planned outages causing production to fall below demand levels and cause a physical “short squeeze.”
  • 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:

  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Increased domestic production capacity leading to an increase in competitive pricing
  • Steel consumers substitute to lower-cost alternatives
  • Limited desire to restock and persistently short lead times causing a “Buyer’s Strike”
  • Economic slowdown caused by increasing interest rates and sustained restrictive policy from the Federal Reserve

HRC Futures

The Platts TSI Daily Midwest HRC Index was down $20 to $800.

The CME Midwest HRC futures curve is below, with last Friday’s settlements in white. The entire curve shifted lower last week, with Nov.22-May.23 futures settling at its lowest levels in the last month.

The 2nd month ferrous futures were mostly lower, led by Midwest HRC, which lost 5.2%.

Global flat rolled indexes were all lower last week, led by Northern European HRC down 2.9%.

The AISI Capacity Utilization was up 0.4% to 78.2%.

Imports & Differentials

September flat rolled import license data is forecasting a significant decrease of 213k to 791k MoM.

Tube imports license data is forecasting an increase of 60k to 509k in September.

September AZ/AL import license data is forecasting an increase of 6k to 120k.

Below is September import license data through September 12th, 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 decreased for Russian, China, Brazil, & Korea, but they ticked slightly higher for Northern Europe and Turkey.

SBB Platt’s HRC, CRC, and HDG pricing is below. The Midwest CRC, HRC, & HDG prices were all down 2.6%, 2.4%, and 1.7%.

Raw Materials

Raw material prices were mostly lower again last week, with Aussie coking coal down 7.7%, while pig iron del to NOLA gained 2.6%.

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 shifted lower, most significantly in the front of the curve.

The ex-flat rolled prices are listed below.

Chinese Inventory

Below are inventory levels for Chinese finished steel products and iron ore. This week, we saw a slight reversal of the recent inventory trend for 5-city and rebar, where both ticked higher. Iron ore ports inventory sank for the second week in a row and HRC inventory slipped as well, albeit at a slower pace than recent weeks.

Economic Data

The remaining significant economic data is to the right.

Base & Precious Metals

Base and precious metal futures were mostly lower last week with the exception of LME nickel, and silver each gained 5.5%, and 3.3%, respectively.


The U.S. dollar was up 0.64 to 109.64, while the Brazilian real lost 2%.


Last week, the October WTI crude oil future lost $1.68 or 1.9% to $85.11/bbl. The aggregate inventory level increased another 0.7%. The Baker Hughes North American rig count increased by 10 rigs, while the U.S. rig count increased by 4 rigs.


The U.S. 10-year yield was up another 14 bps, closing the week at 3.45%. The German 10-year yield was up 6 bps to 1.76%, and the Japanese 10-year yield was unchanged at 0.26%.


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