US domestic flats buyers look to pending scrap announcement

With lingering questions as to the pending decline in scrap pricing, and the extended vacations taken in conjunction with last weekend's US Independence Day holiday, US domestic flats transaction pricing has held neutral since our last report a week ago, although the forecasted trend remains slightly down.

Although rumors are flying that one of the major US flats mills is offering hot rolled coil (HRC) at $29.00 cwt. ($639/mt or $580/nt), the current average transaction range, for most customers, has held steady at $30.00 cwt. to $31.00 cwt. ($661/mt to $683/mt or $600/nt to $620/nt).  But many believe that the sideways move is only temporary, and that additional softening will be seen for both hot and cold rolled coil (CRC) in the upcoming week.

With market chatter of over-buying in May having negatively impacted order placement for June, it's speculated that inventories will soon begin to thin out, and buyers will resume modest purchasing activity.  However, it's not expected activity will resume to the extent that it matches production.  What this will do, though, is stabilize the market, allowing spot prices to shift from a downward to a parallel trend.  But the big question seems to surround the issues of how soon this will take place.   While some predict purchasing activity for HRC and CRC to pick up before the close of the month, the stronger belief is that this will not take place until August, with additional (albeit slower paced) price corrections sustaining until that time.  For now, the trend for US domestic HRC and CRC remains slightly down, although stabilization for the market has begun to appear on the horizon.

Looking to imports, offerings of both HRC and CRC out of Mexico have trended neutral since last week, as have overseas offerings from Russia of these same products.  Further, Chinese CRC has also trended sideways since our last report a week ago.  It should be noted, however, that revised pricing out of the aforementioned countries are anticipated to be announced within the next week.  

*Mexican offers are FOB loaded truck US border states.

** Russian and Chinese offerings are FOB loaded truck, US Gulf ports.