The US flat rolled market is still weak, but there are some encouraging signs that a recovery is on the horizon.
Firstly, domestic prices have remained stable in the last two weeks, with most offers ranging from $24.50 cwt. to $26.50 cwt. ($540 /mt to $584 /mt or $490 /nt to $530 /nt) FOB mill, and domestic cold rolled offers ranging from $28.00 cwt. to $29.00 cwt. ($617 /mt to $639 /mt or $560 /nt to $580 /nt) FOB mill. There are also still some special deals slightly below this range for big customers. However, the pricing trend is now neutral, as most sources predict that the price decay seen in recent months has likely come to an end.
Also, service center and end-user data show that flat rolled inventories continue to come down. The relative strength of the overseas flat rolled markets compared to the US market has allowed US mills to export their products abroad for a good profit rather than flooding the domestic market with low-priced, excess tonnage. Currently, the US is finding new export markets in Latin America. Southern European flat rolled prices are expected to increase after the market returns from its southern holiday, with popular export markets like Italy and Spain expected to show an up-tick in demand.
The declining inventories combined with the slight gains in busheling scrap prices have some flat rolled mills considering a September increase. No major rebound is expected as of yet, as demand from end-users in the housing, appliance, and automotive sectors is still weak, but as soon as demand starts to bounce back, some think that the meager inventories will make prices rebound in an exaggerated way.
For now, lead times are still short, and the Midwest is still railing a lot of tonnage to the West Coast. However, with inventories continuing to decline as mills continue their controlled production approach and import volumes expected to keep declining as we approach the fourth quarter, it looks like the flat rolled market has hit its low point already and that conditions, at least as far as inventories and raw materials are concerned, will only improve for the remainder of the year.
Import-wise, prices are still high and are for the most part above the range that US customers are willing to pay. Sources say that the only flat rolled import that are currently being offered in a large way at competitive prices is galvanized coils, though HDG imports are still down significantly, year-on-year.
Data from the US Import Administration show that in July 2007, hot rolled coil imports totaled 187,596 mt, down slightly from 210,412 in June 2007, and down drastically from 439,380 mt imported in July 2006. Cold rolled coil imports totaled 90,180 in July, down from 116,731 in June and 276,182 in July 2006. Top hot rolled import sources in July were Korea, Canada, Australia, Russia, and Netherlands, while top cold rolled sources were Brazil, Canada, China, Mexico, and Netherlands.