Price increases and economic uncertainty cloud US HDG market

While US hot-dipped galvanized (HDG) mills attempt to regain pricing control, buyers continue to look at economic data for guidance as overcapacity fears remain.

At least seven US domestic flat-rolled mills announced increases of $3.00 cwt. ($66/mt or $60/nt) on spot orders Wednesday and Thursday, which is expected to at least temporarily bump up order activity levels as mills allow buyers to place last-minute orders at pre-increase price levels. The long-term result of the increase announcements on hot rolled, cold rolled, and HDG prices remains to be seen; but for now, because domestic lead times are still a meager two to four weeks on HDG and Galvalume coil, and with order activity minimal prior to the increase announcements, HDG base spot prices have softened $0.50 cwt. ($11/mt or $10/nt) to $37.00-$39.00 cwt. ($816-$860/mt or $740-$780/nt) ex-Midwest mill. Galvalume base spot prices are down $1.00 cwt. ($22/mt or $20/nt) to $38.00-$40.00 cwt. ($838-$882/mt or $760-$800/nt) ex-Midwest mill, with spot prices for coating extras falling subsequently for both.

Market players' main concern now is that domestic demand levels are little changed in the last couple months, but US steel production is still rising. Last week, estimated raw steel production was 1,879,000 net tons, matching levels reached about three weeks ago, and the highest production rate for US mills for all of 2011, as capacity utilization rates moved up again to 76.8 percent. Growing overcapacity in the domestic flats market is casting doubt on the acceptability of any price increase, especially one as significant as $3.00 cwt., unless domestic production rates begin to slow.

Additionally, buyers tell SteelOrbis that current economic uncertainty is boosting their reluctance to stock-up inventories. In the last week, the US stock market prices for the Dow Jones Industrial average have fluctuated up and down substantially on a daily basis, at one point reaching the lowest levels in over two years. And as major economic indicators such as consumer confidence, which incidentally plunged to its lowest reading since 1980 in early August, economic volatility will remain a driving force for US domestic flats buyers.

As for imports, Indian HDG 0.012"x40.875" G30 and 0.019" x 48" G90 prices for the US have increased $1.00 cwt. in the last week, while US buyers' interest in booking futures (little to none) has not changed. Other import prices for the US have been stagnant for the past month and traders report that few are willing to take the gamble considering growing uncertainty in the US domestic market.

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