Order activity picks up in US domestic HDG market

Little change in scrap prices for March is driving some increased activity in the US domestic hot dipped galvanized (HDG) market.

After rumblings over the past few weeks that scrap prices would sink further in March after falling in February, East Coast shredded scrap prices have remained neutral while busheling prices for March only fell $5-$10/lt from February. The marginal change in scrap prices is positively influencing order activity for HDG and Galvalume products. Sources have indicated that buying activity for coated products slowed in February because a number of buyers expected a more significant scrap decrease early in the month-which could possibly have translated to more malleability in mill prices.  And because they ran down their inventories in February, they will now be forced to pay higher prices for April delivery.

With certain mills raising spot prices another $20-$30/nt this past week for April deliveries, spot prices for HDG and Galvalume base are now $48.00-$50.00 cwt. ($1,058-$1,102/mt or $960-$1,000/nt) ex-Midwest mill, a $1.00 cwt. ($22/mt or $20/nt) increase over last week with the prices of extras increasing $1.00-$2.00 cwt. ($22-$44/mt or $20-$40/nt) as well, as lead times continue to hover in the six to eight week range.

And prices are only expected to rise further, as many are anticipating another flat rolled price increase later this month. While mills will be severely pushing the limit with another increase, the rapid absorption of the most recent (mid-February to early March) round of increases makes another extremely likely. April order books are filling up steadily, and the opening of order books for May looks to be just around the corner. There is still some struggle on the service center side however, and most are still unable to transfer all of the flat rolled price increases to their customers, and have had to work off the average cost of a product rather than the replacement costs at today's prices.

Despite an uptick in US domestic activity this week, import activity is still slow regardless of some falling HDG and Galvalume import prices. Traders reported an increase in inquiries of Indian coated products over the past week, which fell $1.00 cwt. for HDG 0.012"x40.875" G30, and $2.00 cwt. for Galvalume 0.019x41.5625 Gr80/AZ55, but the number of orders actually being placed is still light. However, import activity is expected to pick up over the coming weeks with the spring and summer months approaching-a traditionally strong time period for the construction industry in the US (which incidentally saw the first decrease in unemployment levels since August 2010 last month according to the Associated General Contractors of America (AGC)). 

**FOB loaded truck delivered into Houston ports