With US weekly steel production tonnages still looming in excess of 1.7 million tons, compounded with continued economic uncertainty (partially tied to actions and/or certain inactions by the current elected administration in Washington DC), concerns that that sideways pricing momentum within the US domestic flats market may soon begin to falter are becoming increasingly prevalent.
"There's too much steel and not enough orders," said a buyer in the South. "It's a fight for market share and no one wants to be the first to cut production."
While some in the industry have relayed concern that Q4 2010 will lead mills to become increasingly aggressive with pricing as a means of padding order books, others are more hopeful, pointing to the upcoming mid-term elections, which will take place in early November.
"There's not a lot of confidence in the current administration," said one Midwest service center. "But if there is a political party shift in Washington after the upcoming elections, I think that might spur some confidence which will help get things going."
Despite the fact that any political shift will not have immediate legislative consequences, greater confidence in the country's leadership could have an immediate impact on the economy, with the potential to bolster job growth as well as a stronger willingness to resume some of currently stalled construction projects. In Las Vegas, Nevada alone, there are 13 major construction projects, valued in excess of $16 billion, which are either stalled or cancelled due to "current economic conditions".
Also pending in Washington is a soon-to-be introduced legislative bill by Congressman Bob Filner (D-CA), which, if passed, would require banks which have received bail-out money to loosen up lending restrictions- meaning those who are seeking loans will have greater access to the funds needed to put projects in motion.
For now, however, buyers are continuing to trend cautious with their orders, keeping a close eye on inventories, the economy, and mill production levels; all the while hopeful that mills will hold steadfast at current pricing levels as opposed wheeling-and-dealing to get orders. Because of this uncertainty, the current forecast for HRC and CRC has shifted nominally, now at sideways to slightly down.
While the numbers below reflect the most commonly reported transaction ranges, deals for HRC, on orders which boast substantial tonnages, have been reported at closer to $27.00 cwt. ($595/mt or $540/nt).
Looking to imports, previously reported ranges have once again for the most part, remained neutral. The most notable changes, however, include Mexico continuing to be more aggressive and having once again resumed offers of CRC, and the shift of a $1.00 cwt. to $2.00 cwt. spread in Chinese offerings of CRC, although interest in Chinese product remains extremely weak.
Cwt. Metric Ton (mt) Net ton (nt) Change from last week US domestic HRC $28-29 $617 - $639 $560-$580 neutral CRC $33-$34 $728 - $772 $680-$700 neutral Mexican HRC $28-29 $617 - $639 $560-$580 neutral CRC $33-$34 $728 - $750 $660-680 newly offered Chinese CRC $37-39 $816 - $860 $740-$780 ↓$1.00 cwt. on low end Brazilian CRC $34.50-$35.50 $761-$783 $690-$710 neutral
*Mexican offers are FOB loaded truck US border states.
**Chinese and Brazilian offerings are duty-paid FOB loaded truck, US Gulf ports