Spot prices in US domestic HDG market temporarily stable

With most buyers keeping inventory levels lean, US domestic hot dipped galvanized (HDG) coil purchasing activity is holding steady, keeping spot prices firm for the time being.

End-use demand levels in the US domestic HDG coil market continue to remain consistent, and even strong from certain sectors such as automotive, but the majority of service center buyers still aren't bullish enough to stock inventories. Therefore, HDG buying activity--and spot prices--is largely being buoyed by buyers making small, consistent purchases on a regular basis in order to service their customers without building heavy inventory. Such stable activity and virtually no competition from the import market is allowing US flats mills to continue to implement a portion of the previously announced price increases that totaled approximately $5.00 cwt. ($110/mt or $100/nt). However, although demand is steady, high availability of HDG coil is preventing mills from implementing their full increases, and short (approximately four week) lead times, are only facilitating buyers' as-needed purchasing activity.

While lean inventories are allowing for more spot orders in the US domestic market, many buyers are pushing back against mill asking prices which are about $42.00 cwt. ($926/mt or $840/nt) ex-Midwest mill for both HDG and Galvalume base. Spot prices are considerably lower, in the range of $39.00-$41.00 cwt. ($860-$904/mt or $780-$820/nt) ex-Midwest mill for HDG base and $40.00-$41.00 cwt. ($882-$904/mt or $800-$820/nt) ex-Midwest mill for Galvalume base--both unchanged in the last week--with larger orders commanding deals about $1.00 cwt. ($22/mt or $20/nt) under the above spot ranges.

While no one (service center buyers or mill suppliers) wants prices to fall again as they did in late spring/early summer, there is little confidence that the current positive pricing trend in US domestic HDG spot prices will be anything but short-lived. So although domestic spot prices may show some added firming through early October, anything beyond that is uncertain.

Considering haziness in the US domestic coated flat steel market's long term outlook, it's no surprise that import activity is lethargic. The most competitive import offers available are only $1.00-$2.00 cwt. ($22-$44/mt or $20-$40/nt) below US domestic spot prices and therefore too much of a gamble for buyers to take. But one bright spot in the import market is that offshore lead times will be in Q1 2012 by October, when US buyers generally become more willing to take the import risk.

**DDP loaded truck delivered into Houston