US domestic HDG market falls further while imports remain on the sidelines

US hot dip galvanized (HDG) offering prices have slid further since last week as domestic mills continue to cut base prices and slash extras in order to keep their lines full.

US flat rolled mills are still booking for June shipment and are trying to keep their lines as full as possible in preparation for even further weakening of demand this summer as more automotive production will go offline. US mills are even producing niche coated products with lower profit margins that they didn't want to produce when business was strong. Sources say that mills are trying to do as much business as possible in order to fill their June order books, after which they may be able to angle for a July price increase.

Although flat rolled demand remains soft, busheling scrap prices increased this month and are expected to continue strengthening, at least modestly, in the coming months as less auto production means that less busheling scrap will be generated. The absence of competitive imports in the marketplace is also helping to tighten US flat rolled supplies, despite the weak demand. Still, even with the rising raw material costs and lack of imports, it seems unlikely that customers would accept a price increase anytime soon, especially with US mills having to compete fiercely for every ton of business as customer demand remains down by at least 40 percent from normal levels.

In recent months, US mills have continued to shutter more and more production capacity, including the recently announced plans of AK Steel to idle Ashland Works this summer and US Steel's idling of Fairfield Works for at least a month starting May 19. Still, the bleeding doesn't seem to have stopped.

On the HDG side of the flat rolled market, conditions are particularly weak. This is evident as domestic HDG base prices are offered at the same level as cold rolled coils. The usual $4.00 to $5.00 cwt. ($88 /mt to $110 /mt or $80 /nt to $100 /nt) spread between hot rolled coils and HDG has diminished to only $1.00 to $3.00 cwt. ($22 /mt to $66 /mt or $20 /nt to $60 /nt) and the usual $1.00 to $2.00 cwt. ($22 /mt to $44 /mt or $20 /nt to $40 /nt) spread between HDG and CRC has disappeared. While mills are reluctant to lower HDG base prices much further, they continue to reduce extras in order to compete with one another and to keep customers from turning to the usual import sources like India.

Going forward, HDG will certainly be affected by the continuing automotive industry fallout, and demand another one of its main markets, metal buildings, is expected to continue to be dismal as well as many downstream manufacturers are struggling to stay afloat. One coated product trader told SteelOrbis this week, “So many of our metal building customers' projects have been held up because of some kind of banking snafu since credit is still such a big problem. We don't even know how many of them are staying in business.”

Since last week, domestic base prices for HDG and Galvalume products from Midwest mills have slipped by $1.00 cwt., and the most commonly domestic-produced sizes and coatings for those products, 0.019” x 48” G90 (0.48 mm x 1.219 m) for HDG and 0.019" x 41.5625" Gr80/AZ55 for Galvalume, have dropped by $1.00 cwt. as well.

Domestic HDG base prices now range from $22.00 cwt. to $24.00 cwt. ($485 /mt to $529 /mt or $440 /nt to $480 /nt), while 0.019” G90 ranges from $30.00 cwt. to $32.00 cwt. ($661 /mt to $705 /mt or $600 /nt to $640 /nt) ex-Midwest mills. 

Galvalume base prices now range from $23.00 cwt. to $25.00 cwt. ($507 /mt to $551 /mt or $460 /nt to $500 /nt), with 0.019” AZ55 now ranging from $32.00 cwt. to $34.00 cwt.  ($705 /mt to $750 /mt or $640 /nt to $680 /nt) ex-Midwest mills.

The lighter gauge HDG item, 0.012” x 40.875” G30 (0.30 mm x 1.04 m), slipped by $2.00 cwt. since last week, bringing most domestic offers to a range of $30.00 cwt. to $32.00 cwt. ex-Midwest mills, effectively eliminating its premium over 0.019” G90.

As for imports, foreign mills, particularly in Asia, are seeing stronger HDG demand domestically, and are therefore not willing to continue lowering prices to stay competitive with US mills. Furthermore, import sources cannot compete with the short domestic lead times, and ship availability is also limited. Indian and Taiwanese mills, which usually the most competitive import sources for HDG, are reportedly full through June and into July, and will not even give any new quotes until June. Traders say that these mills are would rather wait for conditions to improve rather than offering lower quotes. “We've not seen any competitive import offer for any flat rolled product in at least two to three weeks,” said one trader. “Unless it's a very niche item, you just can't get anything competitive.”

Indian 0.019” G90 offers currently range from $31.00 cwt. to $33.00 cwt. ($683 /mt to $728 /mt or $620 /nt to $660 /nt) duty-paid, FOB loaded truck in US Gulf Coast ports, while South Korean offers for the same product range from $31.00 cwt. to $33.00 cwt. duty-paid, FOB loaded truck in US West Coast ports.

Chinese offers of 0.019” G90 range from $32.00 cwt. to $34.00 cwt. ($705 /mt to $750 /mt or $640 /nt to $680 /nt) duty-paid, FOB loaded truck in US Gulf ports, and Taiwanese offers range from $33.00 cwt. to $35.00 cwt. ($728 /mt to $772 /mt or $660 /nt to $700 /nt) duty-paid, FOB loaded truck in US West Coast ports.

As for 0.012” G30 imports, Indian offers continue to range from $33.00 cwt. to $35.00 cwt. in Gulf ports, while Chinese offers remain in the range of $34.00 cwt. to $36.00 cwt. ($750 /mt to $794 /mt or $680 /nt to $720 /nt) in the Gulf, and Taiwanese offers are offered at the same range on the West Coast. Mexican and Korean offers found at $33.00 cwt. to $35.00 cwt. (Mexican offers are delivered at the border crossing while Korean offers are loaded truck in the West Coast).

Import offers of Galvalume items (0.019" x 41.5625" Gr80/AZ55) from Mexico range from $33.00 cwt. to $35.00 cwt. ($728 /mt to $772 /mt or $660 /nt to $700 /nt) delivered at the border crossing and Taiwanese offers range from $34.00 cwt. to $36.00 cwt. duty-paid, FOB loaded truck on the West Coast.