Domestic flat rolled mills are sticking to their announced price increases, which are already finding some acceptance in the market. However, aside from the increases, there aren't many indications that demand has improved.
As March and April increases start to take hold, hot rolled coil offers on the market have increased by approximately $2.00 cwt ($40 /nt or $44 /mt) in the past two weeks, now ranging from $27.50 cwt. to $29.50 cwt. ($606 /mt to $650 /mt or $550 /nt to $590 /nt) FOB mill. Cold rolled offers have increased by $1.00 cwt. ($20 /nt or $22 /mt) in the past two weeks, now ranging from $31.50 cwt. to $33.50 cwt. ($694 /mt to $739 /mt or $630 /nt to $670 /nt) FOB mill. The pricing trend remains up.
"We are seeing our March and April price increases stick in the market," said Jim Bouchard, Wheeling-Pittsburgh and Esmark CEO, in an earnings conference call last week. Wheeling-Pitt had issued a $50 /nt ($55 /mt or $2.50 cwt.) price increase for April shipments, while competitors
Nucor and AK Steel upped prices $40 /nt ($44 /mt or $2.00 cwt.).
In addition to the March and April price increases,
Nucor is raising prices another $60 /nt ($66 /mt or $3.00 cwt.) for May shipments, and other mills are expected to make similar pricing moves.
While the price hikes are largely driven by increases in the
scrap market, the acceptance that the higher offers are finding in the market indicates that
consumption has improved somewhat. Still, there is not enough evidence yet to show a major rebound in demand. Many speculate that the acceptance of the higher offers is a result of service centers making purchases to hedge against more increases. Also, service center inventory data does not look too promising.
The Metals Service Center Institute reported Monday that at the end of February,
US service center inventories were at 15.8 million tons, down almost one million tons from their peak levels in October. However, February inventories were still 18.2 percent higher than at the same time last year. At the current rate of shipping, this was equal to a 3.7-month supply, above the 2.9-month supply of February 2006 and slightly higher than in January 2007. This means that while inventory reduction is slowly taking place, inventories are still not in step with shipments, so the supply-on-hand amount is not decreasing.
On the other hand, March service center data may tell a different story, as domestic producers such as
Nucor and Steel Dynamics Inc. are anticipating stronger than expected first quarter earnings, and have both upwardly revised their first quarter earnings guidance.
“Market conditions for flat rolled steels have improved since mid-January with a recovery in both demand and pricing due in part to decreased import activity and lower inventories at steel service centers,” said Steel Dynamics president and CEO Keith Busse in a statement. “End-use market demand appears to be up slightly year over year in some sectors, yet relatively flat in others.”
Other factors that bode well for domestic flat rolled prices are the decreased amount of flat rolled imports entering the United States along with increasing import prices. Sources say that there is hardly any foreign flat rolled tonnage coming in at this time, except for some
galvanized on the West Coast. Also, domestic flat rolled prices in the
CIS countries are still increasing, which will result in more import price increases from
Russia. However,
China's flat rolled market is now sluggish.
Import offers for hot rolled coils now range from $31.00 cwt. to $32.00 cwt. ($683 /mt to $705 /mt or $620 /nt to $640 /nt) FOB loaded truck, in
US Gulf ports, while cold rolled offers range from $33.00 cwt. to $35.00 cwt. ($728 /mt to $772 /mt $660 /nt to $700 /nt) for FOB loaded-truck in
US Gulf and West Coast ports. Most hot rolled and cold rolled import offers are not workable currently, and there are very few new orders. Sources say that import tonnage will remain minimal for the next four months.