US domestic flats market sees “frenzied buying” in anticipation of another price increase

Spot prices in the domestic flats market have increased on the low end since our last report a week ago, as firmer order books have allowed mills to be increasingly successful at enforcing higher prices.

Another price increase announcement expected after the Thanksgiving holiday has prompted a boost in market activity in the past week from buyers who hope to secure orders at current prices before the next announcement. How much of the next price increase sticks remains undetermined, however one thing remains certain: the next announcement will all but guarantee mills will receive at least their full asking price from their last increase announced earlier this month.

Domestic hot rolled coil (HRC) spot prices have come up $0.50 cwt. ($11/mt or $10/nt) on the low end over the past week, and are now between $27.50-$28.50 cwt. ($606-$628/mt or $550-$570/nt) ex-Midwest mill. However, the majority of orders are now being booked at or above $28.00 cwt. Lead times in the HRC market have now primarily moved into January, although one Southeast service center noted that some smaller Midwest mills "will make room for buyers who want standard product delivered before year's end."

Domestic spot prices in the cold rolled coil (CRC) market are also up on the low end as the majority of transactions are now being booked between $33.00-$34.00 cwt. ($728-$750/mt or $660-$680/nt) ex-Midwest mill, an increase of $1.00 cwt. ($22/mt or $20/nt) from last week's reported range. Nevertheless, it appears some "$32.50 cwt. ($717/mt or $650/nt) deals are still lingering for large tonnage buyers," one East Coast trader told SteelOrbis, and unlike HRC, lead times on CRC products have now officially moved into January.

More order activity continues to influence raw steel production, which was up an additional 2.2 percent last week, after increasing 2.9 percent in the week ending November 12. Capacity utilization rates were also up last week, increasing 1.6 percent to 70.3 percent, and could increase further if more mills "overbook January the same way they overbooked December" one West Coast distributor forecasted.

Flat rolled mills south of the border in Mexico have closed their order books for the balance of 2010, but continue to book a significant amount of tonnage for January and February deliveries. China, which has presented offers of other flat rolled products to the US, continues to be unaggressive in its CRC offerings. Interest in Chinese CRC remains weak at best, and according to one Southern trader, "they're not pushing, but we're not asking."