Price increases in US domestic HDG market holding steady

Spot prices on coated products are on an upward trend this week as firming scrap prices, along with increases in coating extras have warranted bullish pricing from US domestic mills.

"There's definitely some showmanship going on; no mill wants to be the first to back down" explained one east coast distributor. And it appears to be working; eager to put the past few months of light order books and exceptionally low pricing behind them, mills have been standing tough and enforcing their recent price hikes on hot dipped galvanized (HDG) and Galvalume products.

Domestic spot prices on HDG base products have come up approximately $1.00 cwt. ($22/mt or $20/nt) since our last report a week ago, and are now being reported in the approximate range of $32.00-$34.00 cwt. ($705-$750/mt or $640-$680/nt) ex- Midwest mill, with offers at the lower end of the range fading fast.

Furthermore, higher zinc costs over the past couple weeks have allowed mills to justify raising coating costs even higher, which have translated into spot price increases of approximately $2.00 cwt. ($44/mt or $40/nt) ex-mill, if not more, on offers of 0.019"x48" G90 and 0.012"x40.875" G30 products.

The tendency for domestic Galvalume spot prices has followed a similar upward trend, and base prices are now in the $32.00-$34.00 cwt. range, while the price of the 0.019x41.5625 Gr80/AZ55 product is also up about $2.00 cwt. from last week.

As of right now, order books are "faring well," according to one east coast distributor, and lead times have begun to move into January. Mills have been successful at booking orders at elevated levels in the past week and a number of which, like California Steel Industries (CSI), have already informed customers that they have closed their order books for the balance of 2010. Distributors and traders alike still maintain, however, that "if you call a mill today and want to place an order, I don't know of a single one that wouldn't try to fit you in." So although prices have firmed, and are not expected to soften at least through January and early February, the market is still soft, and the increased buying activity for coated products is more of a reflection of pent up demand  from the past weeks and months of little-to-no buying activity, than any real increase in overall demand levels.

How long prices stay firm could also depend on what the US dollar does in the coming months. The US has seen an average of a 7.5 percent drop in the dollar over international currency over the past four months, making domestic goods cheaper and more appealing abroad. According to a report released November 10 by the US Census Bureau, exports of domestic goods in September were up $0.5 million over August, while imports were $2 billion less than Augusts' totals. The report also specifies that exports of iron and steel mill products were up 1.4 percent, whereas imports of iron and steel mill products fell 18 percent.

On the whole, import activity remains quiet and no new offshore offers have been reported. Looking south of the border however, Mexico's aggressive offers of coated products below the US domestic levels has been paying dividends, and Mexican mills may close their books on HDG products within the next week, if not sooner.