Despite low inventories, US domestic flats prices continue to soften

Lead times are shrinking and US domestic flats prices are still dropping this week although recent data indicate that flat-rolled inventories fell dramatically in March.

Fewer buyers have been placing spot orders and the availability of spot tonnage is plentiful at the mill level, resulting in shrinking lead time. Hot rolled coil (HRC) lead times are now approximately three to four weeks compared to five to six weeks in late March/early April. Cold rolled coil (CRC) lead times have shortened by about two weeks as well and are now in the four to six week range.

Consequently, the compressed lead times have resulted in sharp price cuts at domestic mills. Domestic spot prices for HRC have dropped into the $40.00-$42.00 cwt. ($882-$926/mt or $800-$840/nt) ex-Midwest mill range-down $2.00 cwt. ($44/mt or $40/nt) since our last report a week ago. CRC spot prices continue to hang on better than HRC and are currently $46.00-$48.00 cwt. ($1,014-$1,058/mt or $920-$960/nt) ex-Midwest mill, a $1.00 cwt. ($22/mt or $20/nt) drop on the high end and a $2.00 cwt. (44/mt or $40/nt) drop on the low end since last week.

Metal Service Center Institute (MSCI) data also show that daily flat-rolled shipments from service centers totaled 106,100 net tons in March-up about 4 percent over February, and 17 percent higher than in March of last year. Month-on-hand inventories had a more dramatic month-over-month change, falling to 1.9 months from 2.3-months-on-hand in February. Service centers have been keeping their inventories increasingly lean since mid-March, being cautious with every purchase.

And with fewer buyers making spot orders, flat-rolled spot prices are likely to remain soft for the next couple weeks as high availability as well as competitive import offers have left buyers with a plethora of options if they are looking to place an order. Nonetheless, industry insiders are predicting another small boost of activity in mid-to-late May (June and July deliveries) from distributors in need of replenishing depleted inventories-which may stem declining spot prices for a few weeks before the downtrend resumes in the traditionally slower summer months. 

As for imports, offers have fallen once again with HRC from Russia now in the range of $37.00-$38.00 cwt. ($816-$838/mt or $740-$760/nt) duty-paid FOB loaded truck, although SteelOrbis has heard a few offers about $0.50 ($11/mt or $10/nt) below. Sales prices of Chinese CRC are still $44.00-$46.00 cwt. ($970-$1,014/ mt or $880-$920/nt) duty-paid FOB loaded truck in US Gulf ports, however traders noted that for the right order a buyer wouldn't have to look far to find an offer as much as $1.00 cwt. ($22/mt or $20/nt) under the range.

**Duty-paid FOB loaded truck in US Gulf ports