US domestic plate spot prices have begun to soften since our last report two weeks ago, and while mill direct order placement due to naval ship and other related Department of Defense expenditures remains active, order activity seen at the service center level has remained relatively bland.
The approximate $3.00 cwt. ($66/m or $60/nt) softening in transaction pricing within the plate spot market has not come by surprise, as purchasing managers have been anticipating that price correction seen for hot rolled coils (HRC) would eventually trickle its way into their market segment. US domestic transaction pricing for plate is currently being reported in the approximate range of $38.50 cwt. to $40.50 cwt. ($849/mt to $893/mt or $770/nt to $790/nt), ex-Midwest mills. It should be noted, though that while spot pricing above this range is still being reported, deals are being cut for buyers placing more aggressive orders. "It's pretty much just a game of roulette at this point," commented a Midwest service center. "It all depends on the day of the week and how the coin toss works out."
When to you take price volatility into account, it's not surprising that service centers are beginning to tighten their plate inventories to sub two month supply levels. According to one service center in the South, previously seen three to four month inventory levels are now being kept closer to 1.7 months, while another in the north indicated keeping theirs "at the minimal level manageable to take care of orders", buying only what they need to cover stock.
But at the same time, the US Navy is contributing largely to mill direct order placement. According to a May 2009 article printed in the Navy Times, spending for fiscal year 2010 would include monetary allocations for 3 littoral combat ships, 2 ammunition ships, 1 submarine, 1 high speed vessel, and 1 naval destroyer. Keep in mind, that this also does not include other military spending for upkeep and construction of ground vehicles, nor does it include the deep pockets of the US Army to maintain and purchase combat vehicles, such as tanks. Yet projects not spanning billions of dollars in annual spending are fewer and farther between. "There are very few good plate jobs out there, and everyone is beating each other up trying to get them," added a service center in the South.
Shifting focus offshore, most import offers for the month of June, at current, reflect a month-on-month decrease from May. According to the June 22 data released by the US Department of Commerce Import Administration, for the current month, imports of cut-to-length plate for the month of June are being seen at 30,515 mt (license data), down from 51,547 mt for the month of May. The most significant offshore importer of cut-to-length plate for the month of June thus far, is Brazil, at 3,501 mt, down from 7,844 mt reported during the month of May.