Little stopping US flats market slide

With scrap prices falling in October, there may not be anything to stop the US domestic flat rolled market's renewed downtrend.

As expected, US domestic spot prices in the flats market have continued to drop this week after beginning to soften a week ago. Sources tell SteelOrbis that activity has quieted substantially in just the last couple weeks, with buyers too scared to make any sudden purchases, anticipating that spot prices will drop lower sooner rather than later. Consequently, flats mills have had to once again resort to making deals to get orders, resulting in a softening of market prices; "It's a self-fulfilling prophecy," one service center buyer relayed to SteelOrbis. HRC spot prices have fallen $1.00 cwt. ($22/mt or $20/nt) on the high end since last week into the range of $33.00-$34.00 cwt. ($728-$750/mt or $660-$680/mt) ex-Midwest mill, while CRC spot prices have stayed between $38.00-$40.00 cwt. ($838-$882/mt or $760-$800/nt) ex-Midwest mill.

With purchasing activity erratic, the one thing mills had going for them was stability in the scrap market, allowing them to justify not letting flat-rolled spot prices drop too sharply. However, the previously-predicted neutral trend for October scrap prices did not materialize, and scrap prices have slipped as well. According to SteelOrbis' scrap index, after remaining neutral the last three months, busheling prices on the East Coast have fallen $20/lt in October while Midwest busheling prices dropped $15/lt. So unless scrap prices bounce back in November, some domestic flat-rolled production is taken out of commission for some time or demand experiences a notable uptick, US domestic spot prices will likely continue to ease lower.

While US domestic activity is spotty, activity in the import market is almost non-existent. Traders tell SteelOrbis that in addition to concern about the domestic market's trend three months out (when import orders placed today are poised to arrive), economic concerns are foremost on their customers' minds--worries about political and economic instability are allowing little room for speculating on the market further out than a couple weeks. Regardless, a few offers are still available for both HRC and CRC. Chinese CRC offers have continued their month's-long neutral trend and can still be found between $42.00-$43.00 cwt. ($926-$948/mt or $840-$860/nt) DDP loaded truck in US Gulf ports and Russian HRC offers are in the range of $36.00-$37.00 cwt. ($794-$816/mt or $720-$740) DDP loaded truck in US Gulf ports, also reflecting no movement since last week.