Prices still rising in US domestic flats market in spite of decreased activity

Despite a general slowdown in purchasing activity in the US domestic flat-rolled market, spot prices have surged approximately $3.00 cwt. ($66/mt or $60/nt) since our last report a week ago.

Price increase announcements in the US flats market have run rampant over the past five-to-seven weeks due to rising raw materials costs, and what appeared to be a swelling increase in demand turned out to be fueled, for the most part, by hedge buying against higher prices. Nucor's $3.00 cwt. announced increase last week was expectedly followed by other flat-rolled mills within days, but the largest flat-rolled mill on the West Coast raised the stakes this week by issuing a $5.00 cwt. ($110/mt or $100/nt) price hike on all flat-rolled products, pushing California Steel Industries' (CSI) benchmark hot rolled coil (HRC) and cold rolled coil (CRC) prices to $42.00 cwt. ($926/mt or $840/nt) and $47.00 cwt. ($1,036/mt or $940/nt), respectively, ex-mill. The increases, although significant, are no longer leaving buyers stunned as they had been in recent weeks. "After what's been going on lately, nothing surprises us anymore," one West Coast distributor told SteelOrbis-a common theme that echoed among distributors throughout the US.

But with spot prices for HRC and CRC now in the range of $38.00-$40.00 cwt. ($838-$882/mt or $760-$800/nt) and $43.00-$45.00 cwt. ($948-$992/mt or $860-$900/nt) ex-mill, purchasing activity has certainly slowed, as flat-rolled tags are now $12.00 cwt. ($265/mt or $240/nt) higher than they were less than two months ago-a whopping 43 percent increase. Delivery dates have extended as well, and HRC lead times are approximately six-to-eight weeks, while CRC lead times are now eight-to-ten weeks, leaving no room in mill order books for February deliveries of CRC, and forcing some integrated mills to open order books for April delivery sooner rather than later.

For now, higher prices are poised to remain firm over the next couple of months-although buying activity has declined, it is still relatively steady, due at least in part to capacity utilization rates still hovering between 68 and 72 percent. And if demand continues to be in line with supply and steelmakers don't produce at higher levels that demand warrants, current spot prices could sustain longer than just through Q1, after which the inflated prices are predicted to retreat.

Another factor that is helping uphold current prices is fewer imports being delivered into US ports. Preliminary census data from the US Steel Import Monitoring and Analysis System (SIMA) demonstrate that total import tonnage of hot rolled sheets declined nearly 8 percent in January from 196,762/mt in November to 182,614/mt last month, and imports of cold rolled sheets fell about 11 percent from 80,464/mt to 71,674/mt over the same month-over-month period.

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