Confusion runs rampant in US domestic HDG market

With announced increases totaling $240/nt since mid-November, few in the steel industry have a firm grasp at where current spot prices are, and how high they may go.

After the Nucor Sheet Mill Group announced a $3.00 cwt. ($66/mt or $60/nt) increase on all flat-rolled products January 6, less than two weeks after boosting tags $1.50 cwt. ($33/mt or $30/nt), a number of other mills reportedly rescinded unconfirmed offers at lower prices in order to mull the increases, and decide on their next move-which will likely match Nucor's latest price hike. And as most mills only just reacted to Nucor's December 28 announcement this past week, asking prices on hot-dipped galvanized (HDG) and Galvalume base products now vary anywhere from $42.00-$45.00 cwt. ($926-$992/mt or $840-$900/nt) ex-Midwest, depending on the mill. Market sources agree that the volume of increases and the rapid upswing in spot prices in such a short span of time has "confused the marketplace" making it difficult to decipher who's offering what, and at what price.

Mills should be able to push these most recent set of increases through, however not as quickly as the previous ones (between Thanksgiving and Christmas), and it may take a few weeks before HDG and Galvalume spot prices reach $45.00 cwt. for base products.

For the most part, buying activity in the coated market remains relatively steady; the flurry of purchases that preceded each of the last four-to-six (depending on the mill) increases has slowed, however, and buying activity is now on a cautious, buy-as-you-need basis, as no one wants to be stuck with high-priced inventory when spot prices begin to eventually retreat after the end of Q1.

Nonetheless, spot prices for HDG base products are up $1.00 cwt. ($22/mt or $20/nt), while Galvalume base prices are up $2.00 cwt. ($44/mt or $40/nt) over last week's previously reported ranges. The price of coating extras has subsequently increased as well, and spot prices for HDG 0.019"x48" G90 are up $1.00 cwt. and spot prices for HDG 0.012" x40.875" G30 and Galvalume 0.019x41.5625 Gr80/AZ55 have increased $2.00 cwt. over the past week. The higher priced Galvalume coil prices have been attributed to tighter inventory levels in October and November, thus giving it stronger rebound potential. And since Galvalume buying activity was much weaker than that for other coated products in late Q3, and early Q4, when prices began to increase at a quickening pace over the last six-to-seven weeks, those who had been sitting on the sidelines and making little-to-no purchases were suddenly forced to pay higher prices.

Looking offshore, it appears natural disasters have put offers from Chinese and Taiwanese mills, for the most part, on hold. Recent flooding in Northeastern Australia as a result of the wettest December in 150 years has impacted the Queensland, Australia coal operations, and halted much of the rail transportation in the region. Australia accounts for approximately 40 percent of seaborne coal trade in the world, and the majority of coal imports to Asian countries, particularly China and Taiwan. And so, until they are more certain of what their production costs are going to be in the coming months, Taiwanese and Chinese mills that rely almost solely on Australian coal have withdrawn offers of certain coated products to the US. The Taiwanese offer of Galvalume 0.019x41.5625 Gr80/AZ55, although still available to US buyers, may be gone by next week if a new source of coking coal doesn't become readily available.