Although the US tubing market has hit a soft spot and domestic prices have fallen again, market players are slightly optimistic about the future as there is now chatter that the hot rolled coil market is finally tightening up.
Steel professionals cannot deny the current weakness in the US tubing market. Demand has been continually softening for smaller sized tube especially, as the housing construction market continues to slump. Larger sizes are also feeling the weakness as the slow housing market has had a snowballing effect on the commercial construction market. For the most part, all the construction projects for 2007 are already underway; however, there are very few commercial construction projects planned for the upcoming year. Consumption heading into next year is expected to be light, and this news has lowered the general morale in the market.
Adding fuel to the fire, inventories are high, and on top of that, there is a significant amount of unsold import material at the ports. Domestic mills are feeling the pressure to move inventory as well, especially with the foreign material on the ground, and have dropped prices another notch.
Domestic hollow section prices have fallen by approximately $1.00 cwt. ($22 /mt or $20 /nt) since our last report two weeks ago and are now ranging from $38.00 cwt. to $39.00 cwt. ($837 /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 region. Though tubing prices may quite possibly be bottoming out, the domestic pricing trend is still slightly down as market sources believe there is room for another slight decrease.
Despite the current weakness in the tubing market, domestic hot rolled producers are now talking about price increases. Some say this is nothing more than wishful thinking as consumption figures are increasingly depressing, while others are certain a rebound is in sight. If hot rolled coil prices do tighten up, domestic tubing mills are preparing their customers for a fourth quarter price increase. More realistically speaking, however, buyers are expecting this possible increase in the first quarter of next year since, generally speaking, the fourth quarter is usually slow and a price increase may not be accepted.
It is also worth mentioning that the antidumping case for light-walled tubing from China, Mexico, South Korea, and Turkey will have a strong impact on the domestic market in the US. Taking these four major producers out of the equation will help domestic prices to rebound.
On another positive note, flat rolled prices in China are strengthening, which is pushing tubing mills to up their offers. As the antidumping case on light-walled tube is under investigation, China is only offering tubing in sizes 4" and up. Offers have increased by approximately $0.50 cwt. since our last report two weeks ago; however, there are not many takers as offers are relatively close to the domestic price.
Current hollow section offering prices from China are now in the range of $35.00 cwt. to $36.50 cwt. ($772 /mt to $805 /mt or $700 /nt to $730 /nt) FOB West Coast, and 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 on the Gulf Coast. SteelOrbis has heard numbers higher than this range, possibly from some mills that would like to pass the entire VAT rebate decrease on to US customers. However, those offers have no chance of finding a home in the US until the domestic markets start picking up again.
As for Turkish tubing, flat rolled prices are on the rise in Turkey, pushing up Turkish offers for the US as well. Turkish hollow section offering prices have increased by $0.50 cwt. since our last report two weeks ago and are now ranging from $37.00 cwt. to $38.50 cwt. ($816 /mt to $849 /mt or $740 /nt to $770 /nt) FOB, loaded-truck, US Gulf Coast ports. Due to the high offering price and lack of demand in the US, import bookings have been minimal, only to the US East Coast and Great Lakes regions, which are out of reach for the Chinese competition.
License data from the United States Import Administration for structural pipe and tube show that worldwide exports to the US for May, June and July have decreased slightly each month with tonnage measuring at 60,836 mt, 59,899 mt, and 57,942 mt respectively. In July, the three major exporters to the US were: China, at 22,661 mt; Canada, at 22,214 mt; and South Korea, at 3,665 mt. Half-way through August, worldwide exports to the US are weighing in at 18,971 mt.
Import totals for mechanical sized tubing in May, June and July show the exact opposite trend, with tonnage increasing each month. Total import tonnage measured at 58,074 mt, 62,231 mt, and 64,533 mt respectively. The top three exporters were China, at 24,347 mt; Mexico, at 14,909 mt; and Canada, at 7,892 mt. The high imports during these months may be due to the slight surge in imports seen before the antidumping investigations took effect. Light-walled tubing tonnage from China, Mexico, Turkey and South Korea should diminish to negligible amounts in the coming months.