US flat rolled market cautiously embarks on rough road in 2009

Monday, 05 January 2009 10:19:45 (GMT+3)   |  
       

2008 was an utterly unique year for the US flat rolled market and the global steel industry as a whole. No one had ever witnessed such a big and fast price rally and decline in the history of commercial steel. After what seemed to be a shortage in the first half of 2008, record high prices peaked in the summer, and then followed the emergence of a credit and economic crisis that has crippled buyer confidence and many businesses during the second half of the year.

As we close this volatile year and look forward to a clean slate in 2009, domestic flat rolled prices have most likely bottomed out, and import prices may only have some more slight declines left. But even though the general sentiment is that the bottom is near, a quick and healthy recovery is certainly not in the cards.

One of the biggest issues facing the flat rolled market right now is the credit crisis. Sensing that many bankruptcies are imminent, credit insurance companies have been slashing credit insurance coverages for all kinds of steel companies. Big or small, hardly any businesses are escaping these narrowing credit boundaries. Also, sellers, too, are becoming more reluctant to sell to delinquent and less than reputable buyers. They are already resigned to sell less in 2009 and they want to make sure every sale is at least paid within the set terms. There is also growing concern over whether their clients will be able to survive this economic storm.

Even some large companies that have a decent credit history are being forced to "downpay" a certain portion of their orders. Many of these companies will continue to have difficulties buying products heading into 2009, at least until the credit availability improves.

As per the near outlook for January, the last two weeks of 2008 in the steel world were very slow, even for the holiday season, but the first two weeks of 2009 could prove to be more exciting because many of the companies that have not purchased flat rolled products over the last several weeks will soon have to begin buying again.

Moreover, busheling scrap prices are expected to continue to increase slowly, and domestic mills are holding firm, especially Nucor. SteelOrbis has learned that the company intends to slightly raise hot rolled coil (HRC) prices to around $28.50 cwt. ($628 /mt or $570 /nt) sometime in January.

But as for now, HRC spot prices have trended neutral for the fourth 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.

Most domestic cold rolled coil (CRC) spot prices have also remained at consistent levels for about one month and continue to range from about $29.00 cwt. to $31.00 cwt. ($639 /mt to $683 /mt or $580 /nt to $620 /nt). CRC prices are not expected to trend downward at all and mills have remained even firmer on negotiating.

Meanwhile, import offerings have remained unchanged from the previous week's levels; however, they could trend slightly downward over the next couple of weeks, as the foreign mills compete for business. However, import offers are no longer competing with American offers.

China and Mexico have been aggressively seeking CRC deals in the range of $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt), although prices remain too high for US buyers to consider booking. 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.

Current CRC offers from Turkey and India have also remained unchanged from the previous week, in the range from about $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.

Brazil's CRC offerings also continued to be higher than most of their foreign competition's at 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.

Mexico's and Russia's HRC offers trended sideways from the previous week and remain in the range of 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.

Licensing data from the US Steel Import Monitoring and Analysis System (SIMA) show that the total amount of import HRC arriving in the US during December was 124,468 mt, which is slightly less than the 128,970 mt imported in November. The largest quantities of import HRC in the December period came from: Australia, at 36,972 mt; South Korea, at 27,994 mt; Canada, at 21,632 mt; and Mexico, at 18,903 mt.

Total tonnages of import CRC arriving in the US during December were 49,978 mt, which is 20,672 mt, or about 29 percent less than the 70,650 mt imported in November. The largest quantities of import CRC in the December period came from: China, at 13,664 mt; Canada, at 8,835 mt; and Sweden, at 6,155 mt.


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