Domestic tubing prices are stable for now, but with flat rolled prices on the rise, there is no doubt that tubing producers will follow suit and increase their prices.
Domestic mills attempted to up tubing prices last month, but buyers refused to pay higher prices because of the slow market conditions, and the increase was later rescinded. Most buyers say that the domestic mills jumped the gun and increased prices a little too soon. There was just not enough demand to support an increase, and quite a lot of import inventories were out there to be consumed. Now, however, market conditions are looking a little brighter, and the mills may get their increase.
The scrap pricing trend has been deemed sideways, but the market is expected to improve in the first quarter of the New Year. Also, flat rolled mills have been pushing through price increases. In October, an increase of approximately $20 /nt took hold, and now new increases have been announced for shipments beginning January 1st, 2008. The major US mills have announced a $30 /nt increase come January, and the expectation is that some of the price increase will be accepted by the market. With raw material costs on the rise, tubing producers are gearing up for their next move, which will likely be to increase hollow sections prices for the first quarter of the year. Buyers are anticipating that an announcement from domestic tubing mills will come as early as in December.
In addition to the increasing raw material prices, reduced import tonnage is also helping domestic producers. Although demand for hollow structural sections is not that strong and domestic supply is still plentiful, China, a once-major import source, is completely out of the market with no new offers for the US.
Current domestic hollow section prices are still ranging from $38.00 cwt. to $39.00 cwt. ($838 /mt to $860 /mt or $760 /nt to $780 /nt) for A500 grade A and grade B hollow sections up to 6" in the Midwest regions as SteelOrbis reported two weeks ago. The pricing trend is up as buyers are awaiting a possible price increase announcement from mills.
There is still a glut of Chinese tubes waiting to be downgraded and liquidated for less demanding applications. Potential buyers of these secondary Chinese tubes are paying prices not much higher than the cost of scrap, or they are demanding that every piece is tested for yield and tensile strength. Some of these downgraded Chinese tubes are finding their way into the prime market and suppressing the spot prices.
There are no new offers from China, but if there were, they would have gone up significantly since the cost of flat rolled steel in that region is continually rising and freight rates are very strong. Other potential sources of imported tubing are still not competitive compared to domestic prices. With China completely out of the market, there has yet to be the emergence of a new import source that is at all competitive with domestic numbers.
Turkish offers are still afloat, though there are not many takers. FOB prices are already high, and ships are hard to come by. Offerings from Turkey have remained stable since our report of two weeks ago, with prices still in the range of $38.00 cwt. to $39.50 cwt. ($838 /mt to $871 /mt or $760 /nt to $790 /nt) FOB, loaded-truck, US Gulf Coast ports.