US domestic HDG market anticipates upward trend

The domestic US hot dip galvanized (HDG) market has trended slightly up since our report a week ago on the heels of the recent mill price increase announcements and lower inventory levels.

Spot prices for HDG and Galvalume base products and extras are relatively unchanged from last week, and remain at previously reported levels. However, during the beginning of last week, isolated buyers had reported being able to negotiate deals below the most commonly reported ranges, even claiming as low as $30.00 cwt.($661/mt or $600/nt) ex-Midwest mill for HDG and Galvalume base was attainable in certain circumstances, but by the latter half of the week those instances became just about non-existent, as spot prices began firming a bit.

The primary reason behind this firming is due to mill increase announcements. Earlier last week, Duferco Farrell, NLMK-Indiana and Sharon Coatings started things off, announcing a minimum ex-mill base price of $33.00 cwt. ($728/mt or $660/nt) on all Galvanized and Galvanneal products effective immediately. By week's end, Nucor Sheet Mill Group and AK Steel had followed suit, and increased their minimum base price on coated products by $1.50 cwt. ($33/mt or $30/nt) and $2.00 cwt. ($44/mt or $40/nt), respectively.

In addition to continued overall cutbacks, albeit slight, in production and tighter buyer inventory levels, mill price increase announcements were primarily justified by higher costs due to the average $20/lt increase seen in shredded scrap prices, along with a $5-$10/lt upward shift depending on region in busheling prices.

Buyers and sellers of coated products still maintain that with so many construction projects stalled, and unemployment within the construction sector climbing to 17.3 percent in October, Galvanized and Galvalume products are still the weakest in the flat-rolled market. Moving forward though, it is likely that the new upward trend for coated products, although expected to be slow, will continue into the holiday season, as long as mills do not ramp up production again. 

Looking south of border, Mexico continues to be very aggressive on its offers of Galvanized and Galvalume products to the US, and have been successful at booking a significant number of orders. Offshore activity remains sluggish, as buyers of coated products claim that "demand is still too unpredictable to gamble with product you won't see for months."