US domestic flats market on a precarious upward trend

Spot prices in the domestic flats market have come up approximately $1.00 cwt. ($11/mt or $10/nt) since our last report a week ago as mills appear to be standing firm on their recent price increase announcements.

The most commonly reported range for hot rolled coil (HRC) spot prices is now $27.00-$28.00 cwt. ($595-$617/mt or $540-$560/nt) ex-Midwest mill, with the consensus from most buyers that the time for making deals ended last week."There really isn't a lot of wiggle room anymore. Two weeks ago I could have negotiated $25.75 cwt. ($568/mt or $515/nt) for a large tonnage order, but now most mills won't even consider anything below $27.00 cwt.," explained one buyer in the South.

The downward pricing spiral in the domestic cold rolled coil (CRC) market has also ceased, and the most commonly reported spot prices are now in the $32.00-$33.00 cwt.($705-$728/mt or $640-$660/nt) range ex-mill, and just like with HRC, mills appear unwilling to budge and settle for any offers below the lower end of the range.

Lead times have also lengthened as most mills reported full order books for the November and December months this week-many of which have actually sent letters to customers already, notifying them that they will not be taking anymore orders for deliveries before the end of the year. Nevertheless, service centers on both coasts claim that if they needed to place an order in the next few weeks to plug holes in their inventories, they wouldn't have trouble finding a mill that would fit them in. Lead times on HRC have extended outward to approximately three-five weeks, while lead times on CRC are now averaging five-seven, a significant increase from the respective one-two and two-four week lead times reported only two weeks ago.   

The jury's still out as to what prices will be in the new year, and although prices are expected to remain firm through January, industry insiders speculate that the price increases won't last too much further into 2011 since demand hasn't gained any positive momentum in recent months. For the time being however, current spot offers are expected to be valid through the balance of 2010.

One thing that could keep mill prices firm in coming months is decreasing capacity utilization rates, which have been on a steady decline since week 36, and averaged 66.8 percent last week, the lowest number on record since week three of this year. Overproduction has plagued the industry in the past, and still does in many cases; therefore, a continuation of decreasing production levels will help to balance supply and demand, and will in turn keep pricing trends from pointing downward again.

Looking offshore, import offers remain as quiet as the US' interest in them. With the exception of Mexico, which is now offering HRC and CRC at approximately $1.00 cwt. below US spot prices, there aren't any import offers generating a response from domestic buyers.