UNITED STATES September 13 2016 2:50 PM

NEW YORK (Scrap Register): The price of US HR coil decreased steadily through August, dropping from $615 a short ton FOB Midwest Mill in the beginning of the month to $585 a short ton by the end. Market participants cited the summer vacation, slower end user markets and an increase in imports as reasons for the downtrend, said The Steel Index.

The US HRC market saw a gradual decrease in prices over August, with many feeling increasingly bearish about an eventual turnaround in Q4. They cited a lack of demand from end user markets as one of the reasons.

Lead times decreased from 4.7 weeks to 4 weeks, as reported by TSI data providers. As more inventory becomes readily available, there has been less room for negotiation on price.

Capacity utilization fell from 72.6% on August 6th to 70.2% on August 27th, while crude steel production decreased from 1.697 million mt to 1.642 million mt over the same time-frame, according to AISI data. Despite the decrease in output, market sources still say the market risks saturation from oversupply.

HR Coil product inventories increased in July, ending the month at 3,351.8 short tons. This compared with just 3,105 tons in June, according to Metals Service Center Institute. 

Market sources say service centers will be less likely to purchase new material as prices decrease, and will instead choose to work with existing stock. 

Indeed, service centers will be working to destock over the next few months, especially the Houston area where taxes will be applied to any remaining inventory on December 31, 2016.

Towards the end of August the market saw an increasing appetite for mills to negotiate the prices leading many to believe the price will continue to fall. 

Despite the threat of on-going trade cases, according to the US Department of Commerce, in the month of July, imports to the U.S. of Hot Rolled Coil increased by 48% to 300,817 mt with Japan, Turkey, and South Korea exporting the most into the US. 

Construction was the big winner in end user markets in the month of July. Shipments into the construction sector increased by 17.4% y.o.y. while automotive saw a decrease in shipments of 7.8% y.o.y. according to AISI data. Service centers also saw a small boost in shipments in July of 1.5%.

Scrap slipped to $236/long ton in the month of August, down $5 a long ton from July leaving the mills with little support to increase pricing in August.