US flat rolled market – January hikes finding acceptance, new increases announced

Friday, 14 December 2007 14:56:10 (GMT+3)   |  
       

There has been an up-tick in orders placed with US domestic flat rolled mills since the mills in November announced $30 /nt to $40 /nt increases for January shipments, and sources say that mills are indeed getting the price increases they asked for. In addition, some mills have already announced price hikes for February.

Although not a great deal of orders has been placed yet, the price hikes seem to have spurred the market somewhat, with the higher-priced offers meeting general acceptance. There are some buyers who have not yet paid the increase, but ultimately, the price increase is expected to meet full acceptance.

Taking into account the increases for January (in most cases, a $30 /nt rise, except for ArcelorMittal, which upped prices by $40 /nt), the new domestic offers for hot rolled range from approximately $27.00 cwt. to $29.00 cwt. ($595 /mt to $639 /mt or $540 /nt to $580 /nt), and new cold rolled offers range from $31.50 cwt. to $32.50 cwt. ($694 /mt to $717 /mt or $630 /nt to $650 /nt) FOB mill.

In light of the market's apparent acceptance of these price increases, the flat rolled market situation seems to be improving, regardless of the lackluster demand. Steel service centers must replenish their stocks, and with imports no longer in the picture, buyers have no choice but to buy domestically. Also, with raw material costs continuing to rise - busheling scrap prices rose about $40 /long ton in December, and iron ore prices are expected to rise another 30 percent next year - flat rolled mills will continue to raise their prices as well.

In fact, it is likely that many mills will raise prices again in February or March. While most mills have not yet opened their February order book as they are still waiting for their January book to fill up, ArcelorMittal and AK Steel have both already announced that they will raise prices for carbon flat rolled by another $30 /nt ($33 /mt or $1.50 cwt.) in February. It is not yet clear whether this price increase will be accepted fully or not.

While prices seem to be headed up in the short term because of the lean inventories, it is still not clear if there will be enough demand to support further price increases once everyone's inventories have been replenished. If end-use demand remains weak, in line with the gloomy economic forecasts for next year, the US flat rolled market may start to falter again come second quarter. The domestic steelmakers, however, are hoping that the weak dollar and high ocean freight rates will continue to discourage imports, thus keeping inventories under control and preventing price decay.

While domestic steelmakers are optimistic about the first quarter, traders are singing "Silent Night" this Christmas with very little import business and very few deals to speak of, except for very small tonnage deals of cold rolled, most of which are too high to gain interest in the US.  There are some cold rolled imports being offered from China to the Gulf Coast with a sales price about $0.50 cwt. ($11 /mt or $10 /nt) higher than the domestic, though most offers fall above this range. On the hot rolled side, there are virtually no deals to speak of except for some scattered offers from Mexico. Most hot rolled coils that are showing up in import statistics are either specialty items or for re-rollers of affiliated foreign producers.

In addition to the lack of imports, traders say that exports have slowed down considerably in the last month or so as optimism about the first quarter, high ocean freight rates, lack of ships, and the significant weakening in Europe's steel market have not led to a very export-friendly climate.

Census data from the US Import Administration show that exports of hot rolled sheet totaled approximately 698,000 mt year-to-date (YTD) September 2007, compared to 444,000 mt exported YTD September 2006. Top recipients of the US' hot rolled exports YTD September 2007 were: Canada, at 404,900 mt; Mexico, at 101,200 mt; Spain, at 75,700 mt; Portugal, at 50,700 mt; and Italy, with 22,000 mt.

Cold rolled exports YTD September 2007 totaled 372,600 mt, compared to 360,000 mt YTD September 2006. Top recipients of the US' cold rolled exports YTD September 2007 were: Canada, at 172,400; Mexico, at 165,000 mt; and South Korea, at a distant third, with 5,300 mt.


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