CME HRC futures for July delivery closed at $1,198/st, up $78 on the session and the highest level since early April. The rally accelerated after news that the Department of Commerce is reviewing an expanded Section 232 product scope that could cover certain fabricated steel products.
US mill capacity utilization stands at 79.5%, down 0.5% from last week, as two integrated mills entered planned maintenance outages. Domestic lead times extended to 6-7 weeks, up from 5 weeks in May, as available spot tons continue to tighten.
Import license applications for steel mill products fell 18% month-on-month in May, according to S&P Global. The pending safeguard petition on hot-rolled coil imports from Vietnam and South Korea, filed by Cleveland-Cliffs and Nucor, is creating uncertainty for foreign suppliers.
The Midwest spot market is even tighter than the futures market. Physical HRC for prompt delivery is being quoted at $1,215-1,230/st delivered to Midwest, reflecting a premium over futures that suggests near-term physical constraints are more acute than the paper market prices.
The physical market is tight and getting tighter. Buyers with Q3 requirements should lock in at current levels rather than wait for a pullback. The $1,150 level was resistance in May; it is now support. Layered coverage at $1,180-1,200 is prudent given the trade policy tailwind.