US hot dip galvanized (HDG) prices have not retreated further since last week, although domestic mills continue to lead the way with the most competitive offers. As one trader told SteelOrbis this week, "It's really a domestic game right now."
Furthermore, domestic lead times continue to shrink. SteelOrbis has learned that US domestic mill lead times for HDG products are currently at an average of two-to-three weeks. This is in stark contrast to the normal six-to-eight weeks seen in normal market conditions. With lead times currently being so short, the pricing power clearly rests in the hands of the buyer. Customers, aiming to keep inventories as slim as possible, have come to expect quick deliveries, which importers cannot provide.
On the other hand, while domestic mills are currently happy to accommodate customers' quick-delivery needs, once business starts to pick up, even slightly, buyers could be in for quite a shock. The market could rebound sharply and quickly due to the lack of inventory. The latest Metals Service Center Institute (MSCI) data show that at the end of February, the amount of inventory on-hand at US steel service centers equated to about a 3.4 month supply. However, most flat rolled customers are aiming to keep their inventory levels even lower - as low as one month, according to market sources - which is virtually unheard of in normal times.
As for HDG imports, while domestic offers are generally more competitive because of their quicker deliveries and willingness to beat any import price, SteelOrbis hears that South Korean mills are currently offering the most aggressively, compared to other West Coast sources. To the Gulf Coast, Indian offers are still the most aggressive. Flat rolled and HDG import arrivals in Q2 are expected to shrink further from Q1, reflecting the increase of domestic market share.
Since last week, domestic galvanized base prices have remained at a range of $26.00 cwt. to $28.00 cwt. ($573 /mt to $617 /mt or $520 /nt to $560 /nt) ex-Midwest mills (notably, the same range that domestic CRC is offered at). Domestic offers of 0.019" x 48" G90 (0.48 mm x 1.219 m) range from $35.00 cwt. to $37.00 cwt. ($772 /mt to $816 /mt or $700 /nt to $740 /nt) ex-mill, while 0.012" x 4.875" G30 (0.30 mm x 1.04 m) offers are also steady from last week, with most offers still ranging from $36.00 cwt. to $38.00 cwt. ($784 /mt to $838 /mt or $720 /nt to $760 /nt) ex-mill.
Domestic galvalume base prices and 0.019" x 41.5625" Gr80/AZ55 are also at the same levels as last week, with base prices at $27.00 cwt. to $29.00 cwt. ($595 /mt to $639 /mt or $540 /nt to $580 /nt) ex-mill and AZ55 offered at $36.00 cwt. to $38.00 cwt. ex-mill.
As for imports, Taiwanese and South Korean offers of 0.019" G90 are still ranging $35.00 cwt. to $37.00 cwt. duty-paid, FOB loaded truck in US West Coast ports, with the South Korean offers being the more competitive of the two. Indian offers are the most competitive 0.019" G90 source in the Gulf, offering at a range of $34.00 cwt. to $36.00 cwt. ($750 /mt to $794 /mt or $680 /nt to $720 nt) duty-paid FOB loaded truck in US Gulf ports.
For import offers of 0.012" G30, Indian and Taiwanese offers have also remained at the same levels as last week, with Indian offers ranging from $35.00 cwt. to $37.00 cwt. duty-paid, FOB loaded truck in US Gulf ports and Taiwanese offers ranging from $36.00 cwt. to $38.00 cwt. duty-paid, FOB loaded truck in US West Coast ports. Chinese offers are still $36.00 cwt. to $38.00 cwt. duty-paid, FOB loaded truck in US Gulf ports, but there is very little interest in these offers since they are not as competitive as those of other sources. Meanwhile Mexican offers have also trended neutral since last week, with most offers ranging from $35.00 cwt. to $37.00 cwt. at the border crossing.
Import galvalume offers (Gr80/AZ55) from Taiwan, Mexico, India, and South Korea are still all generally offered at a range of $36.00 cwt. to $38.00 cwt. (Mexican offers are at the border crossing and the Indian offers are duty-paid, FOB loaded truck in US Gulf ports. The Taiwanese and South Korean offers are duty-paid, FOB loaded truck in US West Coast ports).
Census and license data from the US DOC show that HDG imports have been trending down every month since September 2008. However, in the next couple of months the data should reflect even sharper decreases due to the virtual absence of China as a competitive player in the market this year. For February 2009, census data show that the US imported a total of 83,426 mt of HDG sheet and strip, with the largest amounts of tonnage coming from: Canada (26,477 mt), China (16,383 mt), Mexico (9,680 mt), India (9,273 mt), and Taiwan (8,190 mt).