Upward trend continues in US domestic HDG market

Coated prices are trending upward on the heels of an expected uptick in both end-use demand and price trends this spring.

Rising prices in the US domestic coated market have once again spurred hedge buying as buyers prepare for other mills to follow in AK Steel's footsteps and issue a price increase to be effective with all new orders. Spot prices continue to  move up quickly, and base prices for both hot dipped galvanized (HDG) and Galvalume base products have increased $1.00 cwt. ($22/mt or $20/nt) to $44.00-$46.00 cwt. ($970-$1,014/mt or $880-$920/nt ) ex-Midwest mill since last week. Spot prices for coating extras have moved up more dramatically, and HDG 0.019"x48" G90 is up $4.00 cwt. ($88/mt or $80/nt), as traders tell SteelOrbis that the product "has been flying off the shelves." And after stagnating last week, HDG 0.012"x40.875" G30 spot prices are up $2.00 cwt. ($44/mt or $40/nt), although the higher prices are not a reflection of growing demand for the product, but rather mills' insistence on pushing through the full coating extra, and unwillingness to cut deals. Demand for the product, however, may begin to rebound in mid-to-late Q1 as the construction sector this year is predicted to be stronger than 2010. 

The hard-hit construction market remains the most difficult hurdle for coated market players to overcome but recent government data brings hope that 2011 may bring with it considerable improvements in market conditions. Housing starts may have decreased in December over November, but building permits surged last month according to the US Census Bureau. Building permits rose 16.7 percent in December over November, indicating that a number of construction projects are planned for the near future, thus laying the groundwork for increased demand for coated products in the coming months.

Looking offshore, import offers remain plentiful, and while Chinese offers of coated products are anywhere from $3.00-$8.00 cwt. ($66-$176/mt or $60-$160/nt) below US prices, depending on the product, with Chinese lead times now into late May/early June, few are taking stock in the offer. Many market players still expect the coated market to correct itself, and prices to be on the descent when Chinese product is scheduled to arrive, and have thus chosen to wait until they have a clearer view of where prices will be in Q2 before they place large orders overseas. One Southern trader explains that although a few spot deals have been booked, distributors are hesitant to put "all their eggs in one basket," and are treading lightly when it comes to offshore offers.

Elsewhere, production problems that began one-to-two months ago persist south of the border as Mexican mills are still out of the coated market, and orders placed during December are likely to be delayed anywhere from three-eight weeks. But a lack of Mexican offers has boded well for US mills, strengthening their ability to impose higher prices on buyers.