US tubing market: Three domestic price hikes in early 2008; more may come

Friday, 25 January 2008 11:26:11 (GMT+3)   |  
       

US domestic tubing mills are seeing the exact opposite of what they experienced this time last year. In the beginning of 2007, tubing prices were on a decline since demand was suffering and flat rolled prices had plummeted. Compared to last year, the pricing trend has done a complete one-eighty as domestic prices are now increasing.

The New Year has been off to a good start where pricing is concerned for most steel products including hollow sections. Following skyrocketing scrap price increases and almost obscene flat rolled price hikes, domestic tubing mills have upped prices three times already this year -- and it's only January. The first of the price increases, announced in late November for January shipments, bumped tubing prices up by $2.00 cwt. ($44 /mt or $40 /nt). The holidays came and went, and tubing mills announced another $2.00 cwt. ($44 /mt or $40 /nt) increase in early January, effective immediately (as reported in SteelOrbis' last analysis two weeks ago). Buyers had the feeling that prices would rise further following all of the hefty flat rolled increases that were being pushed through, but so soon? Very shortly after the second $2.00 cwt. increase, domestic mills announced yet another price increase for hollow sections, but this time by $3.00 cwt. ($66/ mt or $60 /nt), effective immediately. Mills stand by their reasoning that the increase was due to a rapid rise in raw material costs and also thinning flat rolled supply. 

All in all, 2008 has already seen a whopping $7.00 cwt. in increases for tubing products in the domestic US market, and this is just the beginning. SteelOrbis was told that domestic tubing mills are planning another increase for the end of this month. The increase is expected to bump tubing prices up an additional $1.50 cwt. to $3.00 cwt. ($33 /mt to $66 /mt or $30 /nt to $60 /nt), with most buyers speculating an increase of no less than $2.00 cwt. ($44 /mt or $40 /nt). 

The industry is still waiting to hear concrete figures for this new increase expected in late January. Currently, including the three January increases previously announced, domestic hollow section prices range from $45.00 cwt. to $46.00 cwt. ($992 /mt to $1,014 /mt or $900 /nt to $920 /nt) for A500 grade A and grade B hollow sections up to 6" in the Midwest regions. The domestic pricing trend is strongly up as the market awaits the fourth January increase. 

Not only is there another increase to come in January, but buyers are saying the rest of the first quarter may see more price hikes as well. Scrap prices will level out eventually, but eventually may not be until the spring time. Any more added increases seen in the scrap market will most certainly get pushed onto flat rolled, then onto tubing

Despite the many price increases, domestic consumption is flat at best. On a service center level, it may look as if demand is picking up, though the current service center buying activity is more of a business strategy than anything. Service centers are beefing up their inventories, trying to avoid any additional price increases that may occur over the next month or two. On the same note, fabricators and end-users are buying up the inventories from the service centers, also to avoid the hefty increases to come. Actual demand for the product in the US is not picking up though. This could lead to a bumpy road in the future, which could leave service centers with high-cost steel. 

Imports may begin to look more attractive to US buyers if domestic prices continue to rapidly increase; however, for now, import offers are not much lower than domestic prices, and most are even higher. Flat rolled prices are increasing on a global scale, and freight rates are still on the high side, though they are beginning to level out. 

The Asian offers that were available on the West Coast are now increasing, leaving no reasonable offers currently. 

The Chinese light wall tubing dumping case generated preliminary dumping duties of over 200 percent. This ruling will essentially be the last nail in the Chinese tubing coffin.  Structural tubing sizes are by and large absent from the market due to quality claims and rising prices. 

Flat rolled prices in Turkey are increasing significantly, leaving Turkish tubing producers reluctant to offer to the US. Offers that are in the market are only about $1.00 cwt. ($22 /mt or $20 /nt) shy of the domestic price, i.e. $44.00 cwt. to $45.00 cwt. ($970 /mt to $992 /mt or $880 /nt to $900 /nt) FOB Gulf ports. 


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