Upward price trend in US domestic flats market continues to hold

Spot prices in the domestic flats market have firmed up this week, and the most commonly reported spot prices for domestic hot rolled coil (HRC) have come up $0.50 cwt. ($11/mt or $10/nt) on the high end, and are now being reported between $27.00-$28.50 cwt. ($595-$628/mt or $540-$570/nt) ex-Midwest mill, although transactions at the lower end of the range are now fewer and farther between.

Spot prices in the domestic cold rolled coil (CRC) market are up $1.00 cwt. ($22/mt or $20/nt) on the high end since our last report a week ago and are now being reported in the approximate range of $32.00-$34.00 cwt. ($705-$750/mt or $640-$680/nt) ex-mill, and like with HRC, transactions at the lowest end are becoming more difficult to come by.

Lead times are unchanged from previously reported levels and are still three-five, and five-seven weeks, for HRC and CRC, respectively, and despite a large number of mills claiming their lead times have now moved into the new year, buyers report no trouble being able to have "standard product" delivered by the end of the year if need be. Nevertheless, with a short work week next week, it will be extremely difficult, if not nearly impossible to have any orders placed after the Thanksgiving holiday delivered by year's end.

Heightened order activity in the past couple of weeks has apparently justified a production increase from domestic mills. Output increased 2.9 percent in the week ending November 12, as capacity utilization rates rose to 68.7 percent from a 42-week low of 66.8 percent the preceding week. The nearly 3 percent production surge in just one week's time is a cause for concern, as flat rolled prices will likely not be able to hold firm if production continues to increase, regardless if demand increases as well.

Increased purchasing activity these past weeks has not been a result of any positive movement in demand however, as the industry's hardest hit end-use sector, construction, continues to struggle. Data released Wednesday by the US Census Bureau shows that privately owned housing starts fell in October to a 519,000 annual rate, a nearly 12 percent drop from the previous month, and the lowest level since April 2009; meanwhile, work on multi-unit homes fell over 40 percent in October.

As for imports, activity is little changed from last week. Mexico is still competitively offering hot and cold rolled coil, and has been successful at booking a significant number of tons. Rumors of Venezuelan offerings continue to surface this week, as one trader on the East Coast confirms that "something was definitely booked last week." China, which had been offering its CRC to the US at $36.00-$37.00 cwt. ($794-$816/mt or $720-$740/nt) FOB loaded truck in US Gulf Ports, has apparently "backed off" the market and is no longer competitively offering any flats products to US buyers.

**FOB loaded truck delivered to Houston ports