After months of waiting for the bottom of the US flat rolled market, most industry experts agree that if the bottom is not already here, it is just a small step away. Even though buyers may be able to negotiate a few spot deals here and there, signs such as low service center inventory levels, upward trending scrap prices, and mills’ eagerness to increase prices suggest that the flat rolled market may be headed in a positive direction in the New Year.
One of the mills’ priorities over the last couple months has been to reduce supply levels by cutting production. Steel service centers too are trying to reduce inventories. According to the Metal Service Center Institute (MSCI) shipment and inventory report, US flat rolled inventories totaled over 6 million nt (6.6 million mt) in September, more than 5.5 million nt (6.1 million mt) in October, and just under 5 million nt (5.5 million mt) in November, resulting in the lowest inventory levels in over two years.
In addition to low inventory levels, busheling scrap prices are still trending up, due in part to the reduced US automotive production, thus putting pressure on flat rolled prices to go up as well. In fact, buyers have heard that US mills have been spreading the word that they plan on issuing a modest price increase in January, which they hope will mark the end of the flat rolled market slump.
However, a January price increase may still be deemed premature to withstand the overall weak demand. According to the same Metal Service Center Institute (MSCI) shipment and inventory report, flat rolled product shipments totaled just over 1.5 million nt in November, compared to more than 2 million nt in October. November shipments were the lowest in over two years, indicating that the low inventories and production is matched with equally low demand for flat rolled products.
Heading into the last weeks of the year, domestic hot rolled coil (HRC) spot prices have remained unchanged for the third consecutive week and are in the range of approximately $24.00 cwt. to $27.00 cwt. ($529 /mt to $617 /mt or $480 /nt to $560 /nt) ex-mill in the Midwest. While there may still be the possibility for a deal slightly below this range, mills have definitely tightened up recently, and some started pushing for a price increase next month.
Most domestic cold rolled coil (CRC) spot prices also did not change for the third consecutive week and continue to range from about $29.00 cwt. to $31.00 cwt. ($639 /mt to $683 /mt or $580 /nt to $620 /nt). Many insiders believe that CRC prices have reached bottom, resulting in little to no negotiating room with mills.
Moreover, more buyers are pre-booking well into February to lock-in current rates, considering that long lead times due to production cuts and mills’ new offensive strategy indicate that prices will most likely increase over the next couple months.
On the import side, most import price offerings declined by about $1.00 cwt. ($22 /mt or $20 /nt) from our report two weeks ago, which resulted in most import offers being slightly under the price levels of domestic offers. However, buyers are now becoming certain that the domestic bottom is near and they are bidding at some low numbers, fishing for import bargains.
Current CRC offers from Turkey remain unchanged from last week, but continue to be the low-priced trend-setter for other foreign countries in the CRC import market to the US. Most offers range from $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt) duty-paid, FOB loaded truck in US Gulf ports.
India’s, China’s and Mexico’s import CRC offers all declined by about $1.00 cwt. ($22 /mt or $20 /nt) over the past two weeks and are now in the range similar to Turkey’s offerings of about $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt). India’s and China’s offers are duty-paid, FOB loaded truck in US Gulf ports, while Mexico’s offers are delivered to the US at the border crossing.
Brazil’s CRC offerings also declined by about $1.00 ($22 /mt or $20 /nt) since our last report and now range from approximately $30.00 cwt. to $32.00 cwt. ($661 /mt to $705 /mt or $600 /nt to $640 /nt) duty-paid, FOB loaded truck in US Gulf ports.
Meanwhile, Mexico’s and Russia’s HRC offers also declined by about $1.00 ($22 /mt or $20 /nt) from two weeks ago and are now at about $23.00 cwt. to $25.00 cwt. ($507 /mt to $551 /mt or $460 /nt to $500 /nt). Mexico’s offers are delivered to the US at the border crossing, while Russia’s offers are duty-paid FOB loaded truck in US Gulf ports. Unlike the domestic pricing trend, imports are still trending slightly down, although there are less and less motivated sellers offering at low numbers.