Increasing slab costs to put pressure on US flat rolled prices
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The recent flat rolled price increases have yet to be accepted by US consumers in a major way, but slab buyers are already challenged by increasing slab prices because of the higher slab making cost and the cost to transport them to the US.
Most slab producers are now in a “wait and see” mode since the iron ore price increases have yet to be determined. Almost all buyers are expecting iron prices to go up significantly in 2008, perhaps by as much as 50 percent. For that reason, no significant transactions are taking place, and US slab market remains quiet and uncertain.
There are several slab offers as low as $440 /mt to $450 /mt FOB loading ports for the fourth quarter of 2007 for common HRC grades.
The largest quantities of import slabs arriving in the US during October 2007 came from Ukraine, at 212,106 mt; Canada, at 84,648 mt; Australia, at 72,176 mt; Ukraine, at 56,069 mt; Italy, at 47,326 mt; Russia, at 40,476 mt; and Mexico, at 39,743 mt.
Unlike the slab imports, which are necessary for the US market, imports of billets have been diminishing due to weak US dollar. Only some specialty, hard-to-get grades are entering the country and are coming mostly from Brazil. Local mills are producing plenty of billets for re-rollers, at perhaps the best prices in the world.
The most recent data from the US Steel Import Monitor show that during October 2007, the countries that exported billets to the US were: Brazil, at 19,610 mt; Canada, at 8,922 mt; and Mexico, at 3,926 mt. Italy, Japan, China and Switzerland also exported a small amount of billets during the same period.
The current billet price in the US is approximately $530 to $550 /mt delivered, and with soft scrap prices, billet pricing is expected to trend down slightly. Scrap prices should rebound in the upcoming months and along with them, billets should also strengthen some. Plus, in the absence of imports, US wire rod mills are experiencing good demand, and rebar mills may follow this trend in Q1 2008.
The most talked about export deals are for NAFTA countries, i.e. Canada and Mexico. High freight rates kill most potential trade with Asia, Europe and Latin America, but some small amount of container trade to Asia is reported from the West Coast. The export price level remains $470 to $480 /mt FOB.
The top recipients of high carbon billets from US in the third quarter of 2007 were: Canada, at 41,726,000 kilograms; Mexico, at 8,896,000 kilograms; and Venezuela, at 1,614,000 kilograms. Some other countries which also imported high carbon billets from the US in the third quarter of 2007 include Indonesia, Belgium, and Singapore.
The total amount of billet exports in the third quarter of 2007 is 74,759,000 kilograms, which increased 70,310,000 kilograms when compared to the figure 4,449,000 kilograms in the third quarter of 2006.
On the international markets, CIS origin 3SP-5SP billets are currently being offered for export at around $495 to $500/mt FOB Black Sea for late December shipments, and trending slightly up in the recent weeks.
The Turkish billet export level is at $530 to $540/mt FOB.