It is pretty much inevitable that US flat rolled prices for July production are headed up, but the question is: by how much?
Mills' June order books are closed, and the market is awaiting prices for July production. AK Steel recently announced an increase of $75 /nt ($3.75 cwt. or $83 /mt) for all new orders, being the first major US mill to announce prices for July. Nucor, US Steel, and ArcelorMittal are all expected to be announcing their July prices early next week, and the sentiment in the market is that the price increases may be in the three-digits.
Not only did a major competitor, AK Steel, increase its prices significantly, but busheling scrap prices recently took another huge leap, which will create higher raw material costs for mills. In order to match AK's announced base prices, the mills will have to up their prices by approximately $120 /nt ($6.00 cwt. or $128 /mt), and buyers agree that it is certainly a strong possibility that they will do so.
AK Steel's new base price for domestic hot rolled coil (HRC) is $56.25 ($1,240 /mt or $1,125 /nt), while its new base price for cold rolled coil (CRC) is $61.25 ($1,350 /mt or $1,225 /nt) ex-Midwest mills. Though this is pricing for only one US mill, July prices from other mills are expected to be in this vicinity.
Demand for HRC and CRC is decent since these products go into markets like pipe and tubing, which are relatively strong. Inventories are said to be in line with demand. However, the market dynamics may change slightly going into the second half of the year because more imports are surfacing at attractive numbers.
Lately, both galvanized and CRC offers have been making their way onto traders' desks from multiple sources for attractive prices. Although offshore prices are also headed up, some sources are still offering at reasonably below the domestic numbers, and this may begin to turn some heads.
The Chinese cold rolled offerings for June shipments that SteelOrbis reported two weeks ago, ranging from $56.00 cwt. to $57.00 cwt. ($1,235 /mt to $1,257 /mt or $1,120 /nt to $1,140 /nt) are no longer available, as traders are waiting for the new July offers. The new offers will surface within the next week or two and are expected to be comparable to the domestic prices, or perhaps slightly lower.
However, there are Chinese galvanized offers available at prices significantly under the domestic price. Chinese offerings for HDG 0.019" by 48" G90 are quite attractive, ranging from $65.00 cwt. to $67.00 cwt. ($1,433 /mt to $1,477 /mt or $1,300 /nt to $1,340 /nt) FOB loaded truck West Coast ports for August or September deliveries. Galvanized offers from other sources have also been seen at attractive numbers.
Hot rolled coil imports have been virtually non-existent, although there has been some talk of South American mills possibly considering offering HRC to the US during the summer months. This may be just market chatter, but with prices in the US continually climbing, there are good opportunities for offshore mills to find some business here.