US domestic flats prices hinge on a correction

Sinking import offer prices compounded by a slowdown in US domestic order activity has created growing oversupply in the US domestic marketplace, leaving current domestic flat-rolled spot price ranges hanging on by a thread.

Although flat-rolled inventories have been kept relatively lean in recent months, and end-use demand levels look to be gradually improving, the general consensus among industry insiders is that the market has peaked, and flat-rolled spot prices may be only weeks (or possibly days) away from declining. Accordingly, buyers are exercising extreme caution in terms of buying activity, and are avoiding building inventory levels.

The softened order rate coupled with high capacity utilization rates across the board at domestic steel mills (up 1.5 percent to 75.4 percent last week) has also created some oversupply of flat-rolled steel in the market. Sources have indicated to SteelOrbis that in an effort to fill order books, some domestic mills have been aggressive in offering attractive prices for exported hot and cold rolled steel.

May order books have been filling up, but at a notably slower rate than the previous five months. Most spot orders today are being placed toward the lower level of this week's ranges of $43.00-$45.00 cwt. ($948-$992/mt or $860-$900/nt) for hot rolled coil (HRC) and $48.00-$50.00 cwt. ($1,058-$1,102/mt or $960-$1,000/nt) for cold rolled coil (CRC), both ex-Midwest mill and unchanged from our last report a week ago.

Another major factor that is severely impacting the long-term staying power of current US domestic flats spot prices is falling import offer prices. Import offers for the US are now approximately $4.00-$5.00 cwt. ($88-$110/mt or $80-$100/nt) below US spot prices, and in some cases may be negotiable up to $1.00 cwt. ($22/mt or $20/nt) below  the low end of this week's ranges.

The most competitive offshore offers continue to be for Russian HRC. While Russian HRC offers for the US have dropped $2.00 cwt. ($44/mt or $40/nt) since last week and are now officially in the $38.00-$40.00 cwt. ($838-$882/mt or $760-$800/nt) duty-paid FOB loaded truck in US Gulf ports range, some offers as low $37.00 cwt. ($816/mt or $740/nt) duty-paid FOB loaded truck in US Gulf ports may be attainable. Similarly, while Korean HRC offers can be found in the range of $39.00-$41.00 cwt. ($860-$904/mt or $780-$820/nt) duty-paid FOB loaded truck in US Gulf ports, traders note that some offers have been heard as much as $1.00 cwt. below the low end of the range.

And due to continued uncertainty in US domestic spot prices, inquiries for offshore flat-rolled steel have been growing with a small uptick in bookings over the past one to two weeks.

**Duty-paid FOB loaded truck in US Gulf ports