US domestic HDG market shows no signs of slowing down

Spot prices for US domestic hot dipped galvanized (HDG) products have continued to move up over the past week and are poised to remain firm through at least mid-Q2 deliveries.

HDG and Galvalume base prices have both increased $2.00 cwt. ($44/mt or $40/nt) since last week to $47.00-$49.00 cwt. ($1,036-$1,080/mt or $940-$980/nt) ex-Midwest mill with the lower prices only available until month's end when ranges will move up to approximately $48.00-$49.00 cwt. ($1,058-$1,080/mt or $960-$980/nt) ex-mill, especially as the cost of coating extras picks up steam.

Mills have been adamant about enforcing extras on HDG and most orders for both 0.012"x40.875" G30 and 0.019"x48" G90 are being placed at around $60.00 cwt. ($1,323/mt or $1,200/nt) ex-Midwest mill. Spot prices for Galvalume coating extras have increased on par with HDG; however, it is mostly due to less inventory of the product available at the mill, as end-use demand for Galvalume is still somewhat sluggish.

Rising prices don't seem to be slowing down just yet; industry players still believe that another increase is possible, and mills could attempt to raise prices again for May deliveries before the end of Q1. The forecast for scrap in March is sideways to slightly down, and if scrap does come down, domestic mills may have difficulty justifying another increase to buyers, but as one trader in the South explained, "they've done it before. Scrap prices went down in February and mills raised prices- and the increases are sticking too. I see no reason why they wouldn't try for another."

Either way, order activity in the HDG market may get another boost come April from the service center side. Most service centers bought heavily in December and January, and have informed SteelOrbis that they are stocked through April, but "no one has enough to get through May or June." According to the latest data from the Metal Service Center Institute (MSCI), US service centers had only about 2.2 months-on-hand of flat rolled inventory at the end of January as daily shipments skyrocketed, rising almost 27 percent in January from December to 108,200 net tons-the highest level since August 2008.

Import activity however, is not expected to improve in the near term and despite some short-term uptick in prices over the coming weeks. US spot prices are still predicted to be on the decline by the time import orders placed today begin arriving in US ports (in June and July). Nonetheless, some small orders have been placed at Indian mills for the HDG 0.012"x40.875" G30 product for delivery in the US Gulf Coast ports, while Chinese offers of HDG are garnering interest from buyers on the US West Coast.

**FOB loaded truck delivered into Houston ports