US domestic flats market shifting trends

Spot prices in the domestic flats market have trended sideways this week, and it appears the downward pricing momentum has ceased for now.

Spot prices for hot rolled coil (HRC) have remained neutral since our report a week ago, and are still being reported in the approximate range of $26.00-$27.00 cwt. ($573-$595/mt or $520-$540/nt) ex-Midwest mill, and although isolated transactions as of last week indicated that buyers were able to negotiate deals below $26.00 cwt. for larger tonnages, sources are indicating that these deals are no longer available, and even the lower end of the above-mentioned range is becoming more difficult to obtain.

Recently announced scrap increases will only help flats mills firm up their prices over the next several weeks, as shredded is up about $10-$20/lt if not more in some places, and busheling saw marginal increases of up to approximately $10/lt in some parts of the Midwest.

Filling up November order books will continue to be a difficult feat for mills, however most buyers expect that selling out December at current spot prices shouldn't be a problem. Nevertheless, less scrap availability in the winter time and lower mill inventories could contribute to mills following in the footsteps of an earlier announcement made this week by Duferco Farrell, NLMK-Indiana and Sharon Coatings, and issuing a price increase announcement setting HRC base prices back up to a minimum of around $28.00 cwt. ($617/mt or $560/nt).

In regards to cold rolled coil (CRC) , the most commonly reported transaction ranges have also remained neutral, with the bulk of orders being placed around $31.00-$32.00 cwt. ($683-$705/mt or $620-$640/nt) ex-Midwest mill with little potential to be quoted below $31.00 cwt. Nevertheless, there are some mills that have remained aggressive, for now, with their large tonnage buyers in hopes of booking more orders and maintaining their market share until the start of Q1.

At least partially in response to decreased capacity utilization rates, which came down another 0.2 percent in week 43, deterioration in prices for hot and cold rolled products appears to have halted. Production decreases compounded by firmer scrap prices, which are historically higher in the first couple months of the year, may be just the combination needed to bump prices back up. So for now, the trend for the US domestic flats market will be neutral, but pointing upward, with the expectation of more price increase announcements by the start of 2011.

Looking to imports, it appears that US buyers still show little interest in offshore offerings, as import sales prices are still significantly above domestic, and as with the past few weeks, Mexico continues to be aggressive and mirror US price movements.

Overall, as a result of lackluster demand in past months, imports of flats products fell in October according to preliminary license data from the US Steel Import Monitoring and Analysis System (SIMA). Imports of hot rolled sheets fell by about 33 percent from 198,981 mt in September to 148,937 in October. Imports from Korea and Australia experienced the most significant drop-off and were cut in half in October slipping from 56,022 to 27,533, and 34,012 to 17,606, respectively.