US domestic and import flats prices fall substantially

Both US domestic and import flats prices have fallen in the last week, and additional declines are on the horizon.

With US domestic flat rolled prices softening on a week-on-week basis, a similar purchasing mentality that plagued the flats market throughout the summer has emerged: holding off purchases until the market appears to have hit bottom, even if that means buying below what's needed and stretching existing inventories. And for now, a bottom does not appear to be in sight as hot rolled coil (HRC) and cold rolled coil (CRC) spot prices have fallen $1.00 cwt. ($22/mt or $20/nt) in the last week to $32.00-$33.00 cwt. ($705-$728/mt or $640-$660/nt) and $37.00-$39.00 cwt. ($816-$860/mt or $740-$780/nt), respectively, both ex-Midwest mill. Deals below the ranges are also growing in frequency, particularly on the hot rolled side where large buys are being placed at approximately $31.00 cwt. ($683/mt or $620/nt) ex-Midwest mill.

Domestic overproduction is still a major problem in the US market, but in addition to a severely imbalanced supply/demand dynamic, another major factor weighing down the domestic flats market is falling raw material costs. With domestic scrap prices dipping slightly in October and another possible decline now predicted for November, and global iron ore prices falling as well, the cost of production has consequently declined. Industry insiders tell SteelOrbis that before mills issued price increases this past August, spot prices were approaching the cost of producing the steel itself (and in some cases spot prices were below the cost of production), eating into mills' profits. But now, the cost of raw materials is lower than it was two months ago, resulting in some sources speculating that prices could easily fall another $1.00-$2.00 cwt. ($22-$44/mt or $20-$40/nt).

Import prices are falling as well. While interest in imports is minimal, offshore mills are starting to become more aggressive in their offers to the US. In particular, after a months-long neutral trend, Chinese CRC offer prices to the US have fallen $1.00 cwt. cwt. to $41.00-$42.00 cwt. ($904-$926/mt or $820-840/nt) DDP loaded truck in US Gulf ports, and traders tell SteelOrbis that another drop of at least $1.00 cwt. is likely in the next week or two. Russian HRC offer prices are $1.00 cwt. lower than they were a week ago as well, in the range of $35.00-$36.00 cwt. ($772-$794/mt or $700-$720/nt) DDP loaded truck in US Gulf ports.