US domestic flats prices weak but with minimal downside potential

Incremental price erosion has persisted within the US domestic flat rolled spot market over the last week, but prices might not drop too much further. With hot rolled coil (HRC) spot prices falling to $28.00-$29.00 cwt. ($617-$639/mt or $560-$580/nt) ex-Midwest mill and cold rolled coil spots dropping to $33.00-$34.00 cwt. ($728-$750/mt or $660-$680/nt) ex-Midwest mill last week, sources tell SteelOrbis that prices likely do not have much further to fall. While it doesn't appear that the market has necessarily hit bottom yet--lead times remain short, customers are wary of stocking inventories, and sub-CRU deals are still having a negative impact on the spot market--demand is steady and mills are struggling to stay profitable at current price levels.

Hope for some price stability also stems from anticipation that the domestic scrap market may have bottomed in May after falling $20/lt, and prices in June/July could be sideways to up. Even just rumblings of a possible upward move could be enough for mills to try and firm up flat rolled prices. Imports, meanwhile, aren't having much impact on the US domestic market in the Midwest but mills on the US West Coast are competing with futures offers from China and Korea. Chinese CRC offer prices are just under $33.00 cwt. ($728/mt or $660/nt) DDP loaded truck in US West Coast ports, while Korean offer prices for HRC are in the range of $31.00-$32.00 cwt. ($683-$705/mt or $620-$640/nt) DDP loaded truck in US West Coast ports. Traders have said that the lower end of the Korean price range is attractive enough to engage some futures activity.

*DDP loaded truck in US Gulf ports

**DDP loaded truck in US West Coast ports

***DDP loaded truck delivered into Houston