US domestic HDG market continues its sideways trend

US domestic coated spot prices have not changed since our last report a week ago as order activity continues to remain as flat as the demand levels driving it. Base prices for both hot dipped galvanized (HDG) and Galvalume base products are still in the range of $45.00-$47.00 cwt. ($992-$1,036/mt or $900-$940/nt) and $45.00-$46.00 cwt. ($992-$1,014/mt or $900-$920/nt), respectively, ex-Midwest mill. But while most HDG transactions are being placed at the lower end of the ranges, Galvalume bookings are trending toward the higher end.

Although mills are having more success implementing higher Galvalume prices, the success has been mainly attributed to fewer US Galvalume producers and lower inventories of the product in Q4 2010 when prices began to rise. On the HDG side, mills continue to collect higher prices on the 0.019"x48" G90 product while 0.012"x40.875" G30 prices are still lagging far behind official asking prices.

Mills are clearly bullish in their perception of market conditions as US raw steel production continues to increase, rising 0.9 percent in week 4 after increasing 1.8 percent a week earlier. Rumors of another price increase anywhere from $20-$40/nt persist although scrap prices are already down approximately $20-$25/lt for February. Demand has softened over the past weeks and so the rationale of "rapidly rising raw materials costs" and "increased demand" cited in the last six-or-seven increase announcements is no longer viable.

Order activity has not only been slow in the US this past week, but import activity is light as well with few offers available for any interested buyers to consider due to the observance of the Lunar New Year holiday in China and Taiwan. Once production does resume overseas, however, no influx of offshore purchases is expected with delivery dates from both countries now pushing late-May/early June.