As domestic flat rolled prices continue to trend down, and hollow section producers are not seeing enough orders, rumors are surfacing that domestic tube mills will lower their prices once again.
Domestic flat rolled prices have softened as a result of the lackluster demand in the US market, which will most likely lead to a drop in tubing prices. Sources say domestic hollow section prices are on their way to possibly drop another $1.00 cwt. One Southeast Gulf area distributor commented that transaction prices for certain Canadian customers were being reduced, which will most certainly "bleed" into the states. Another source commented that producers were giving decent size price breaks on large orders to customers in the US. As of yet, it doesn't appear that the price decrease is nationwide; however, with the current state of the market, prices will most likely fall within a week or two.
The hollow sections market is not terrible, but supply is outweighing the current demand. Larger sized tubing is a tad stronger as the non-residential construction market is still pretty strong; however, smaller sizes are very weak. Mills are not booked to capacity, and service center inventories are pretty healthy. Along with these mediocre market conditions, the depreciation of flat rolled prices is pushing customers to demand a drop in prices from the mills.
Currently domestic hollow section prices still range from $41.00 cwt. to $43.00 cwt. ($904 /mt to $947 /mt or $820 /nt to $860 /nt) for A500 grade A and grade B hollow sections up to 6" in the Midwest region. The pricing trend is slightly down.
It has also been heard that domestic tubing mills are unhappy about the volume of imports coming into the states and may file a dumping petition case on China. Although injury to the US steel industry is hard to prove, and success is not guaranteed, filing will help to slow imports down for at least a year during the investigation period.
US standard pipe producers filed an antidumping and CVD petition against China today, and the hollow sections producers may soon follow their example.
As we mentioned in our last hollow sections report two weeks ago, market players are continuing to hear talk that China's VAT rebate for tubing may be reduced to five percent or less. Now that June 1st has passed, and the export tax on other steel products is now implemented, it seems to be just a matter of time before the VAT rebate on tubing is reduced. At this point, however, it is all speculation. No one has a definite answer for if and when it will take place, but the most talked about date is July 1st. Most Chinese tube producers are no longer holding back their offers, but are instead negotiating with customers to share the additional cost if the VAT rebate were to be reduced.
All this talk has pushed Chinese producers to up their offering prices by $1.00 cwt., and they are now offering hollow sections to US traders in the range of $32.50 cwt. to $34.00 cwt. ($717 /mt to $750 /mt or $650 /nt to $680 /nt) FOB West Coast, approximately $0.50 cwt. ($11 /mt or $10 /nt) higher on the Gulf Coast. East Coast discharge is roughly another $0.50 cwt. ($11 /mt or $10 nt) higher than the Gulf Coast.
Import offers from Turkey have softened by approximately $0.50 cwt. due to flat rolled pricing in that region falling some. Turkish tubing offers are now in the range of $36.50 cwt. to $38.00 cwt. ($805 /mt to $838 /mt or $730 /nt to $760 /nt) FOB, loaded-truck, US Gulf Coast ports, though there are not too many takers.