Domestic flat rolled prices have hit their high point for the year, and the question on everyone's mind now is whether prices will stay flat for the rest of the year or if they will start to decline.
While
Nucor's contract sheet pricing is set to drop $70 /nt in September due to softening busheling
scrap prices, spot market pricing will not change. But will prices start to fall after September?
Market players are expecting domestic mills to cut back their
production towards the end of the year to control supplies and keep pricing stable. The general expectation is that prices may soften some in the Midwest and Northeast, but the mills' disciplined approach to
production will prevent any major price slippage this year.
As a Midwestern service center told SteelOrbis this week, “I think we definitely hit the peak and are now coming back down other side, but not as fast as customers believe. We will likely see some discounts in the fourth quarter, but mills are going to control the spot market by curtailing their
production output.”
The West Coast flat rolled market will be kept somewhat tight as
slab availability in the region is scarce. However, the domestic West Coast market has to compete with aggressive cold rolled and
galvanized offers from East Asia, so we will probably see some decline in cold rolled and
galvanized prices on the West Coast as soon as October.
In general, the domestic hot rolled market is still stronger than the cold rolled market, as hot rolled supplies are slimmer and cold rolled is much more readily available, however, the market hasn't entirely accepted August increases that saw
HRC rise $1.00 cwt. to $32.00 cwt. to $33.00 cwt. Most domestic hot rolled coil offers now range from $31.00 cwt. to $32.00 cwt. ($683 /mt to $705 /mt or $620 /nt to $640 /nt) FOB mill, while domestic cold rolled offers range from $36.50 cwt. to $37.50 cwt. ($805 /mt to $827 /mt or $730 /nt to $760 /nt) FOB mill. The pricing trend for US flat rolled products is now neutral to slightly down.
The import pricing trend is now down, as most major world markets for flat rolled are still soft, especially for cold rolled. Chinese cold rolled prices have started to stabilize and are no longer falling, but there are not many buyers in the US as cold rolled inventories are already high. With rising Chinese
production of cold rolled coils, we will probably see their prices start to drift down again. Chinese hot rolled
production is on the rise also, but inventories are still not as large as cold rolled.
Export prices from Eastern European countries are also on the decline, as their supplies are uncomfortably large, and they are looking to move tonnage before year-end.
Following the downward trend, most import hot rolled offers have declined by approximately $1.00 cwt. since last week, now ranging from $29.00 cwt. to $30.00 cwt. ($639 /mt to $661 /mt or $580 /nt to $600 /nt) FOB loaded truck, US Gulf ports. Import cold rolled offers range from $33.00 cwt. to $34.00 cwt. ($728 /mt to $750 /mt or $660 /nt to $680 /nt) FOB loaded truck, US Gulf and West Coast ports. However, exporting countries are much more willing to negotiate with prices, so there are also bargain offers on the market, and we will probably see further declines in the coming weeks.
Final census data from the US Import Administration shows that in the first six months of 2006, the top exporters of hot rolled sheet to the US were:
Korea, at 449,125 mt;
Egypt, at 360,666 mt;
Canada, at 232,398 mt;
Australia, at 214,033 mt; and
Turkey, at 186,475 mt.
The top exporters of cold rolled sheet to the US from January 2006 through June 2006 were:
Brazil, at 222,549 mt;
Taiwan, at 190,418 mt;
China, at 188,940 mt;
Canada, at 161,909 mt; and
Russia, at 117,803 mt.