While the domestic flat rolled market is not accepting the full price increase that the mills are asking for, most offers on the market have gone up slightly in recent weeks.
Domestic hot rolled prices have increased by approximately $1.00 cwt. ($22 /mt or $20 /nt) since our last report, now ranging from $28.50 cwt. to $30.50 cwt. ($628 /mt to $672 /mt or $570 /nt to $610 /nt) FOB mill. Fairing worse than HRC, cold rolled prices have only increased by approximately $0.50 cwt.($11 /mt or $10 /nt) since our last report, now ranging from $32.00 cwt. to $34.00 cwt. ($705 /mt to $750 /mt or $640 /nt to $680 /nt) FOB mill.
While the March and April price increases were largely accepted by the market, many market players do not expect Nucor's announced $60 /nt ($66 /mt or $3.00 cwt.) increase for May to go through entirely, as demand remains relatively flat and service center inventories are only down slightly from the beginning of the year. Sources say that demand for cold rolled products is especially depressed. The automotive and residential construction sectors are very weak, though the energy and non-residential construction sectors remain decent. However, the recent cold weather in the northeastern US has put a damper on construction in that region for the time being. Customers tell SteelOrbis that they do not expect flat rolled demand to recover significantly until late summer 2007.
Also, busheling scrap prices have dropped $25 to $30 /long ton this month, so scrap-based mills like Nucor will have a harder time passing raw material-driven increases.
As for the import market, offering prices are still in the same range as we last reported, with most hot rolled coil offers still ranging 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.
Traders say that Russian mills are by and large the only foreign sources offering competitively to the US, though there is a small amount of material coming from New Zealand as well. Cold rolled imports are coming mostly from China and Brazil. Galvanized imports are dominated by China and light gauges by India. Other major hot dipped galvanized sources are Taiwan, Brazil and Korea.
Needless to say, since imports are noticeably higher-priced than domestics, bookings have been light. Also, there are not that many offers available, as foreign mills would rather offer to the hot markets in Europe and Asia for better returns. Due to these factors, 2007 is expected to be a weak year for flat rolled imports. However, there are still some import orders being booked in the US. A flat rolled trader told SteelOrbis this week, "People get a little confused and think that there's no import business, but that's not the case. Just a brief look at the statistical information shows that flat rolled imports are operating at around 50 percent of what they had been at their peak last spring and summer. So we're still doing import business, just about half as much."
Indeed, census data from the US Import Administration show that while flat rolled imports are down significantly since last year, the import flow has not slowed to a full stop. Total year-to-date 2007 (January through March) hot rolled sheet/coil imports to the US amounted to (rounded to the nearest hundred tons) 621,200 mt, compared to 965,000 mt of HRC imported during the same time last year. YTD 2007 cold rolled sheet/coil imports totaled 431,300 mt, compared to 633,000 mt for the same period last year.
While US flat rolled demand is still tepid and inventories are still on the high side, eventually the market will feel the lack of imports and purchasing activity will resume. So, despite the current state of the market, the future does not look particularly grim.