Steel Markets Monthly has commented in past on the wide swings seen in HR-CR coil margins in recent years. The US rule of thumb for re-rolling has been 100 dollars/short ton (say 110 dollars/tonne) or 5 dollars/UScwt. It can be expected to change over the course of the price cycle, depending on how the impetus for a price rise (or the pressure for a price cut) arises. The logical expectation is that the margin will be squeezed when coil prices are driven out of a trough by production cuts which first show up in the merchant HR coil market. If demand for coated coil sparks off a market revival (whether superior coated coil for carmakers or construction grades serving a building boom) the margins will open out before HR coil starts to be over-booked and sees a price rise. Either way, the expectation is that if the margin will recover after being squeezed, and that a widening margin is a harbinger of a fall in CR and/or coated coil prices. The market does not always follow such a tidy logical course. The three charts show CR coil prices and margins over HR coil in the world's three biggest developed markets (price behaviour in China is another matter, principally dealt with in MBR's Emerging Markets Monthly), The first and most obvious point is that the average margin is now slightly below 110 dollars/tonne - about 10 percent below the old rule of thumb. The other is that at the beginning of the period covered, in both the USA and in the EU CR coil prices did what the conditions of the margins suggest they should.
展开▼
