The US flat rolled market is beginning to reflect a standoff between mills and potential buyers, as producers are firming up their price expectations, while buyers continue to show little interest in purchasing at current price levels.
Many US mills believe that their production cuts of about 50 percent of total capacity may finally have reached the levels necessary to constitute the end of the price decreases, especially considering that spot prices rose slightly, by about $1.00 cwt. ($22 /mt or $20 /nt), a couple of weeks ago; however, most buyers feel that their sales are still too weak to warrant big inventory purchases.
In fact, judging from the Metal Service Center Institute (MSCI)'s shipment and inventory report, demand for flat rolled products continues to worsen month by month. While US service center flat rolled inventory levels decreased from a little over 5,300,000 nt in October to almost 5,000,000 nt in November and less than 4,700,000 nt in December, monthly shipments also declined from 2,100,000 nt in October, to about 1,550,000 nt in November and only 1,300,000 nt in December. However, even with less tons, December inventory levels were equal to about 3.6 months of inventory on hand, compared to 3.2 months in November and 2.7 months in October.
Domestic hot rolled coil (HRC) spot prices have trended sideways from our last report two weeks ago and remain in the range of approximately $25.00 cwt. to $27.50 cwt. ($551 /mt to $606 /mt or $500 /nt to $550 /nt) ex-mill in the Midwest. While price decreases are not likely to be seen in the near future, if the demand weakens much further from current levels, mills may begin to feel pressure to negotiate deals again.
Furthermore, most domestic cold rolled coil (CRC) spot prices have also trended neutral since our last report and now range from about $30.00 cwt. to $32.00 cwt. ($661 /mt to $705 /mt or $600 /nt to $640 /nt) ex-mill in the Midwest.
As mills and buyers hold their ground, the market is expected to continue trending neutral over at least the next couple of weeks.
On the import side, while most price offerings have remained unchanged from our last report, many of the deals are fluctuating up and down by about $1.00 cwt. ($22 /mt or $20 /nt) from week to week, creating a little uncertainty as to the price trend.
Chinese mills have been attempting to firm up CRC prices, and while most offers continue to be in the range of about $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt) FOB loaded truck in US Gulf ports, higher rates to traders are making some Chinese offers less competitive.
Brazil and Argentina are also offering CRC to the US in the range of approximately $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; however, they have been much more aggressive and active than their Asian counterparts.
CRC offers from Turkey, India, and Mexico have all remained neutral from our last report, in the range of $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt). The offers from Turkey and India are duty-paid, FOB loaded truck in US Gulf ports, while Mexico's offers are delivered to the US at the border crossing.
Regarding import HRC offers, Mexico's offers have remained unchanged from two weeks ago and are in the range of about $24.00 cwt. to $26.00 cwt. ($529 /mt to $573 /mt or $480 /nt to $520 /nt) delivered to the US at the border crossing; however, US traders may be able to negotiate deals on the lower end of this range especially considering the strength of the dollar compared to the current state of the peso.
Licensing data from the US Steel Import Monitoring and Analysis System (SIMA) indicate that South Korea exported the most HRC to the US during the fourth quarter 2008, with 115,939 mt. (Most South Korean HRC imports are converted into downstream products at USS-POSCO's facility in Pittsburg, California.) Canada was a close second, with 109,382 mt, and Mexico rounded out the top three with 53,417 mt of HRC exported to the US.
The top three exporters of CRC tonnage to the US during the fourth quarter 2008 were: China, with 61,784 mt; Canada, with 45,934 mt; and the Netherlands, with 31,522 mt.