US domestic HDG spot prices poised to continue upward trend

Prices in the domestic hot dipped galvanized (HDG) market are increasing rapidly as a number of mills have issued price increase announcements on coated products of an additional $2.00 cwt. ($44/mt or $40/nt) for the third time in less than two weeks.

Nucor's $40/nt increase on all flat-rolled products on December 6 came as a surprise to many other mills, however by week's end ArcelorMittlal, AK Steel, Steel Dynamics, Duferco Farrell, among others, had also issued "price adjustments," putting asking prices on coated base products into the $40.00 cwt. ($882/mt or $800/nt) range.

Despite the announced increases, spot prices on HDG base and Galvalume products remain within last week's reported range of $35.00-$37.00 cwt. ($772-$816/mt or $700-$740/nt) ex-Midwest mill, although the numbers are quickly moving out as most bookings are at least at the $36.00 cwt. ($794/mt or $720/nt) level, and asking prices are now at a minimum of $37.00 cwt.-$40.00 cwt. ($816-$882/mt or $740-$800/nt) depending on the mill. "They're going to shoot for the moon," and if they don't get the full amount, there's no reason not to try right now, said one East Coast trader. One thing's for certain though, the third increase will shortly force the first two to stick-at least for the time being.

The price of both HDG and Galvalume coating extras is up $1.00 cwt. ($22/mt or $20/nt) from our last report a week ago, as mills are enforcing charges on extras just as much as they're enforcing their increases.

Lead times on coated products are still approximately six-to-eight weeks, although a few distributors report having a hard time booking orders for February deliveries, as some mill delivery dates are now into March.

The rising cost of raw materials has been cited as the primary rationalization for the slew of increases in recent weeks, and as the price of busheling is up about $50/lt this month already, higher input costs have been translating into higher asking prices. Nonetheless, there is a discrepancy between input costs, and asking prices, which has been attributed to mills trying to get back some of the margin they lost in September and October. However, as spot market prices rise, so does the difference between contract prices and spot prices, which could prove destructive for higher spot prices when mills go to renew contracts next year. One Southern trader explained to SteelOrbis that "mills are going to have a hard time justifying higher prices if there's a $10.00 cwt. ($220/mt or $200/nt) gap between asking prices and contract prices." 

Although there has been both a rise in prices and buying activity in recent weeks, interest in import offers remains as scarce as the offers themselves, and many still do not feel demand is high enough, or the market is strong enough, to consider product that won't be delivered until the spring. Furthermore, due to the continued price increases in the US domestic market, many offshore mills are currently taking this time to reassess what levels they want to come back with and offer to the US.