US domestic and import HDG prices on a slippery slope

Both US domestic and import hot dipped galvanized (HDG) coil prices have registered yet another dramatic drop in the last week, and the downtrend isn't showing signs of letting up.

Following an approximately $1.00 cwt. ($22/mt or $20/nt) decline in US domestic hot rolled coil (HRC) and cold rolled coil (CRC) spot prices in the last week, HDG and Galvalume prices are moving lower. Domestic HDG base prices are down about $1.00 cwt. on the high end to $37.00-$38.00 cwt. ($816-$838/mt or $740-$760/mt) ex-Midwest mill, while Galvalume base spot prices have fallen $1.00 cwt. on the low end since last week to $37.00-$39.00 cwt. ($816-$860/mt or $740-$780/nt) ex-Midwest mill, reflecting growing mill flexibility in cutting prices to fill order books.

Sources tell SteelOrbis that in the current unbalanced domestic flats market in terms of supply and demand, few, if any, mills are enforcing the full coating extras on many HDG and Galvalume products. So while spot prices for notable HDG coil products with coating extras (see chart below) are $1.00 cwt. lower than they were a week ago, plenty of deals are being cut for large orders and especially for products with multiple coating extras.

As for the supply situation, data from the American Iron and Steel Institute (AISI) show that US weekly raw steel production slumped a significant 4.3 percent last week. However, the decline followed increases the prior two weeks that together totaled 4.5 percent. Consequently, with no boost in consumption expected in the immediate future and no indication that flats mills plan to make more significant production cuts just yet, US domestic HDG spot prices will likely fall again in the next week.

Import HDG and Galvalume prices to the US are falling quickly as well, and traders tell SteelOrbis that additional drops are likely in the next couple weeks as a result of falling global raw material costs, low HDG demand in other countries such as China and India, as well as declining US prices. In particular, Indian and Chinese prices for both HDG and Galvalume offer prices are down about $1.00-$1.50 cwt. ($22-$33/mt or $20-$30/nt) almost across the board, and are likely to move lower again over the next couple weeks, mirroring drops in US domestic prices. But even with the declines, futures booking activity is close to non-existent. Even Mexican HDG and Galvalume offers, which are just below US prices, aren't particularly attractive at the moment considering the deep discounts available from many US domestic mills.

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