US domestic flats market sees softened order activity and rising prices

Order activity has slowed since our last report a week ago due to the upcoming Christmas and New Year holidays, although spot prices continue to trend upward. With a short week this and next week and many in the steel industry taking time off, little change is expected in the final days of 2010; however, the early days of 2011 should provide a clearer picture of what market conditions and pricing trends will look like throughout Q1.

Spot prices on hot rolled coil (HRC) and cold rolled coil (CRC) are up $1.00 cwt. ($22/mt or $20/nt) over last week to $33.00-$35.00 cwt. ($728-$771/mt or $660-$700/nt) and $38.00-$40.00 cwt. ($838-$882/mt or $760-$800/nt), respectively, ex-Midwest mill. And as with the past few weeks, spot prices are moving out quickly, and offers on the lower end are proving to be increasingly difficult to book.

Even generally large-tonnage buyers who often report being able to strike deals with mills concede that they too have had to succumb to rising prices. "If you had told me a month ago I'd be paying $34.00 cwt. ($750/mt or $680/nt) for HRC in December I would have said you were crazy; but here we are. It's a seller's market out there."

Earlier this week ArcelorMittal USA surprised many by informing customers that the company will not be raising its flat-rolled prices through March 31, 2011 from their benchmark of $35.00 on HRC and $41.00 cwt. ($904/mt or $840/nt) on CRC. The announcement was touted as a relief to the swift run-up in prices over the last few weeks, yet the decision appears to rather be an attempt to gain additional market share, as ArcelorMittal USA has control over most of its raw materials costs and is thus less affected by the volatile scrap market, which anticipates a dramatic $40-$50/lt increase in prices next month, than mini mills. Additionally, ArcelorMittal won't have to guarantee prices for too much longer, as lead times are moving out almost as quickly as spot prices. Delivery dates, which moved entirely into mid-to-late February for most mills in the latter days of last week, have now been pushed into March by some mills on specialty CRC items.

On the import side, significant tons of Russian HRC were booked last week, and sources indicate that the $32.00-$34.00 cwt.($705-$750/mt or $640-$680/nt) FOB loaded truck in US Gulf ports offer may be gone by week's end. The Korean HRC offer of $34.00-$36.00 cwt. ($750-$794/mt or $680-$720/nt), although garnering little attention with highly competitive Russian and Mexican offers available, may become more attractive to US buyers in 2011 if they hold steady and further increases on flat-rolled products are announced in January.