US domestic HDG prices sink as mills aim to cut out market deals

In the last week, amid minimal spot market activity and continued buyer caution, US domestic coated flat steel spot prices have fallen. Domestic hot dipped galvanized (HDG) and Galvalume base spot prices have fallen by $1.00 cwt. ($22/mt or $20/nt) in the past week, with costs for corresponding extras falling in tandem. Lead times are only about four to five weeks on coated products, which has resulted in mills allowing customers to make deals in order to fill order books. But those deals, many of which are tied to CRU accounts as buyers add tons to their contract orders to lock in less expensive prices, have been detrimental to the US domestic flat rolled market and mills are now trying to fight back.

ArcelorMittal USA, Severstal NA and Nucor informed customers that they will no longer accept these lower-priced deals; Severstal also announced that its new HDG base price would be $37.00 cwt. ($816/mt or $740/nt). Sources tell SteelOrbis that mill margins are extremely slim and even just keeping spot prices steady has proved to be impossible. The immediate short-term impact of the mills' actions is still undetermined, although many are skeptical as to how quickly mills can rid themselves of contract deals without losing customers to a competitor in the process as mills fight for orders. However, the general consensus appears to be that the move was a step in the right direction, even though Severstal's price increase announcement is not anticipated to affect spots much; the market is likely still too weak for prices to trend up.