US sheet market buyers have seen hot-rolled coil prices edge down in the last few weeks, but market sources said Monday that low inventories at service centers could keep prices from falling much more.
Market sources were anticipating the public release of the Metals Service Center Institute data, which will be released Tuesday. In January, US service centers carried about two months of sheet supply on hand, and in February, they stocked 2.2 months of supply. Both of these figures show tightness in the US supply chain. In January and February 2016, US service centers carried 2.5 and 2.4 months of supply on hand, respectively.
One service center source said he saw flat-rolled inventories falling in March.
"It seems that steady demand combined with buyers unwilling to take positions at these numbers is just shredding inventory levels," which "should support pricing, at least keep it from falling very far," the source said.
Another service center source said he saw the sheet market as "stable" given current service center inventories. He saw HRC prices at $640/st ex-works, though he has not purchased any spot recently.
If service centers let flat-rolled inventories fall below two months of supply, the second service center source said he believed buyers will have to come back to buy -- and more heavily than they have been.
Multiple mill sources have said that even though order entry has been steady, buyers have been booking fewer tons than normal because they feared prices would fall.
For buyers who would normally purchase 400 st at a time, inquiries now are for 170 st or 240 st, a mill source said. Low service center inventories are generally a positive for US mills, but service centers these days largely don't need to stock as much.
"The mills are better at delivery than they used to be," the mill source said. However, it just takes one mill to have a problem for the market to get tight, the mill source said.
The mill source said conversations for spot HRC start at $660/st, but $640-$650/st is more realistic for 400 st or 500 st.
The Platts daily HRC and cold-rolled coil price assessments remained flat at $650-$660/st and $850-$870/st, respectively, on Monday. Both assessments are normalized to an ex-works Midwest (Indiana) basis.
