The standoff between US flat rolled mills and buyers throughout the first month of 2009 continues; however, demand remains lower than many had expected for this month. Order backlogs still look empty and buyers still have room to negotiate prices.
As each week passes by, few changes have occurred in the mentality of either mills or buyers. Mills have remained adamant about keeping their prices stable due to significant production cuts of around 50 percent over the last few months and the fact that people are eventually going to need to purchase steel for various projects they have been holding off on.
Nonetheless, it is becoming apparent that January is also turning out to be a disappointing month for most distributors and steel consumers. With sales so slow, buyers still do not need to purchase flat rolled products as mills had hoped. Buyers can wait longer because inventories are remaining stubbornly high compared to current shipments. While the flat rolled market had appeared to have bottomed out at the end of December, the bottom now appears to be weakening, leaving room for further downward price negotiations of about $1.00 cwt. ($22 /mt or $20 /nt).
Domestic hot rolled coil (HRC) spot prices trended sideways from last week and remain in the range of approximately $25.00 cwt. to $27.50 cwt. ($551 /mt to $606 /mt or $500 /nt to $550 /nt) ex-mill in the Midwest. However, most transactions are now happening towards the bottom of this range. Also, despite mills' best efforts to keep prices firm and regain some control of the market, buyers appear to be gaining the upper hand again, and could negotiate deals for under the $25.00 cwt. ($551 /mt or $500 /nt) mark if they are "ready to buy" significant tonnage.
Most domestic cold rolled coil (CRC) spot prices also remained the same since last week and continue to range from about $30.00 cwt. to $32.00 cwt. ($661 /mt to $705 /mt or $600 /nt to $640 /nt) ex-mill in the Midwest. As with HRC, CRC buyers may be able to negotiate deals for under $30.00 cwt. ($661 /mt or $600 /nt) for orders of the right size and volume.
Moving forward, the US flat rolled market is expected to trend neutral over the next couple weeks, although mills may continue to become more flexible on large orders.
Overall, import flat rolled offers to the US are also seeing a slight softening in the bottom of their price range, as overseas mills seem to be becoming a little nervous about the continuing low demand in the global markets.
Mexico, Argentina, Brazil and Venezuela are all actively offering HRC imports in the range of $24.00 cwt. to $26.00 cwt. ($529 /mt to $573 /mt or $480 /nt to $520 /nt). Mexico offers are delivered to the US at the border crossing, while the South American offers are duty-paid, FOB loaded truck in US Gulf ports. While this range is consistent with last week, it is becoming more apparent that negotiations can move prices below the low end of this range, for orders of the right size and volume.
CRC offers from Brazil, Argentina, Turkey, India and Mexico are also aggressive and remain in the range of approximately $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt). Mexico's offers are delivered to the US at the border crossing, while the remaining offshore offers are duty-paid, FOB loaded truck in US Gulf ports. Some offers also have the ability to be negotiated downward by about $1.00 cwt. ($22 /mt or $20 /nt) for significant tonnage.
One positive development is that Chinese mills remain persistent in keeping their prices firm and are no longer flexible with import CRC offers to the US. Chinese offers did not change over the past week due to observance of the Chinese (Lunar) New Year and remain at about $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt) duty-paid, FOB loaded truck in US Gulf ports. Some traders are eager to see which direction Chinese mills will decide to go in once they return to the market over the next couple weeks. In years past, the import market seemed to follow the trend of the Chinese after the Chinese New Year. If Chinese mills remain firm, the market will most likely continue to trend neutral for a while, but if Chinese mills come back and decide to be more aggressive, we could begin to see more import activity across the board.
Licensing data from the US Steel Import Monitoring and Analysis System (SIMA) demonstrates that imported HRC to the US continues to decline on monthly basis, with totals of 138,091 mt in November; 136,151 mt in December; and an estimated 105,236 mt in January.
However, according to licensing data, it is estimated that imported CRC tonnage to the US with increase in January, rising to 78,845 mt, compared to census data showing 68,969 mt in November and 57,995 mt in December.