Skepticism grows as US flats mills attempt second round of price increases

In another leading move, Severstal North America announced a $1.50 cwt. ($33/mt or $30/nt) increase on non-contract orders for shipments beginning on December 26, 2011 last Tuesday--the increase is in addition to a price increase announced in early November. Since Severstal's announcement, NLMK USA issued a similar increase through an internal company memo on Monday but said that its increase would be effective immediately, indicating a disparity in mill lead times; a few other mills have already started to advise their customers to commit to any unconfirmed offers as their prices would soon be increasing as well. But while US domestic hot rolled coil (HRC) and cold rolled coil (CRC) spot prices have firmed about $1.00 cwt. ($22/mt or $20/nt) on the low end in the last week (see below chart), they remain well below new asking prices from Severstal and NLMK, at $35.00 cwt. ($772/mt or $700/nt) on HRC and $40.50 cwt. ($893/mt or $810/nt) on CRC.

It's too early to tell whether or not flat rolled spot prices will firm up by the $3.00-$4.00 cwt. ($66-$88/mt or $60-$80/nt) needed to reach mill asking prices amid continued domestic overproduction and stagnant demand; buyer sources tell SteelOrbis that there is no long-term confidence that the price increases will stick. But in the short term, the increases appear to be a means to boost activity throughout the normally slower November/December months, and push lead times entirely into January--HRC lead times are still in late December but some mills are starting to offer January deliveries on CRC--when buyers are able to be "more liberal with their purse strings," according to one Southeast distributor. Domestic scrap prices have a tendency to rise in January as well, which could also lend support for higher domestic flat steel prices.

As for imports, while there has been a noticeable increase in import activity for coated flat steel products so far in November--as offer prices are now well below US domestic spot prices--offshore offer prices on HRC and CRC are still too high for most to gamble on right now. Nonetheless, import interest isn't entirely silent and more and more US buyers have been inquiring about imports in the last couple weeks, although actual bookings are still minimal.