U.S. flat rolled steel prices appeared bearish, accelerating declines throughout June. HRC prices fell nearly 9%, their most significant month-over-month drop since February. CRC and HDG prices saw respective 6% declines, while plate prices fell 4%.
Steel prices remain in search of new bottoms as the market appears increasingly soft. As of June 13, hot rolled coil prices managed to hit their lowest level since October 2023 amid reports of slow demand conditions. Mills reportedly held back on scrap orders, leading some to speculate that June could also see a drop in scrap prices.
Last quarter, mills reported variable performances. While Nucor and SDI saw a pickup in demand from Q4 2023 to Q1 2024, shipments from Cliffs and U.S. Steel declined. All four of these mills saw shipments decline year over year.
By the start of Q2, mills were warning markets that impending maintenance outages could substantially tighten domestic supply. However, those warnings offered only temporary support to prices in early April before the downtrend resumed.
Despite market reaction in cold flat steel products, the halts saw a decline in domestic crude steel production levels during April, followed by a gradual recovery during May. By June, domestic steel producers appeared to once again tighten production levels, trying to regain control of the market. As of mid-June, steel prices remained negative, while factory delivery times declined. Which may ultimately force factories to further restrict production levels.
Imports rise, especially from Vietnam
Import demand likely participated in pulling down domestic prices. US prices had broader financial advantages over their global counterparts at the beginning of the second quarter, which helped stimulate demand for imports. Both March and April saw a jump in flat steel imports, with this trend continuing through May as well.
HRC, CRC, and HDG imports, Source: US Department of Commerce
Despite its uncertainty, since the beginning of 2024, the volume of flat steel exports from Vietnam has increased significantly. Its monthly volume in the first five months of 2024 increased by more than 453% over the same period in 2023.
The jump appears to be mainly driven by HDG imports, although CRC volume also saw a significant increase from its recent average. As of March, Vietnam has surpassed Mexico as the second largest export source of HDG to the United States. During May, data showed that Vietnam accounted for more than 23% of total imports. Although this is not unusual, it does raise some red flags.
Vietnam imports raise fears of Chinese steel dumping
Vietnam has faced persistent accusations as a Chinese steel dumping site. Many point to the high volumes of Chinese HRC imports entering Vietnam, and the country then processes these imports into CRC and HDG. With this treatment, it is easy to change the origin of the materials and find their way to the export market, which opens the door to bypassing the duties imposed on Chinese steel, by misleading the source of the materials.
The high quantities of low-priced Chinese HRC imported into Vietnam have at least Vietnamese steel manufacturers concerned. On March 19, Hòa Phát Group and Formosa Hà Tĩnh Steel Corporation submitted a proposal to the Ministry of Industry and Trade (MoIT) to initiate an investigation into imported Chinese HRC steel.
However, it is still unclear whether the ministry in Vietnam will agree to the investigation due to opposition from other steel manufacturers.
The two companies that made accusations regarding Chinese imports are the exclusive companies that produce HRC in Vietnam. Panama Other manufacturers, including HDG producers, have expressed concern about the impact of this investigation on the Vietnamese steel sector overall. If Chinese steel supplies are restricted, this will likely lead to higher steel prices in Vietnam, making the finished products less competitive in the global market.
It currently appears that the influx of imports from Vietnam into the United States has greatly impacted domestic steel prices. The United States could see the launch of an independent investigation into flat steel imports or the imposition of new protectionist measures.
