US HDG prices rising, but still fall short of announced increases

As US mills continue to receive strong order entry rates following price increases a couple weeks ago, US domestic hot dipped galvanized (HDG) and Galvalume coil spot prices have started to firm. Domestic HDG and Galvalume base spot prices are up $1.00 cwt. ($22/mt or $20/nt) since last week to $36.00-$38.00 ($794-$838/mt or $720-$760/nt) and $36.00-$37.00 cwt. ($794-$816/mt or ($720-$740/nt), respectively, both ex-Midwest mill; spot prices for corresponding coating extras have increased $1.00 cwt. in the last week as well. But the full announced price increases, which ranged from $2.00-$2.50 cwt. ($44-$55/mt or $40-$50/nt), have not been absorbed yet, and it remains to be seen if the rush of order activity in the last couple weeks will persist long enough to allow mills to keep pushing for higher prices. At least for the time being, the increase announcements have put a floor under domestic HDG and Galvalume spot prices.

In addition to ending what had been a precipitous decline in domestic spot prices in the weeks leading up to the increases, the increase announcements also managed to bump up prices on the CRU, allowing mills to renegotiate contracts--most mills' main source of revenue--at higher numbers. For at least the next couple weeks, domestic spot prices are likely to continue firming, especially with lead times on coated flat steel products already moving into January. However, there continues to be a general consensus from buyers that the increases will only be temporary if real cuts to production are not made. And with US weekly raw steel production jumping another 2 percent last week after climbing 2.6 percent the previous week, industry insiders tell SteelOrbis that they are concerned that mills are rapidly increasing production rates in line with the recent jump in order activity. One Southern distributor noted that "if production keeps rising (and demand doesn't pick up), then mills will quickly produce orders currently on the books and lead times will begin to shrink all over again."