The pricing trend for domestic flat rolled products has shifted from slightly up to neutral, as the recent scrap price decreases have taken the remaining momentum out of the market from the raw material side.
Not unlike the domestic wire rod mills, domestic flat rolled producers are having to accept that their raw materials-based May price hikes are not sticking. Market offers for hot and cold rolled coils have remained stable since increasing around $20 /nt after more price increases were announced in April to make up for the increase scrap prices took in February and March. However, scrap took a dive in April, and now that scrap has come down again in May, it is even less likely that the remaining $40 /nt of the domestic mills' May increase will go through.
At the beginning of May, domestic hot rolled coil offers continue to range from $28.50 cwt. to $30.50 cwt. ($628 /mt to $672 /mt or $570 /nt to $610 /nt) FOB mill. Cold rolled coil offers range from $32.00 cwt. to $34.00 cwt. ($705 /mt to $750 /mt or $640 /nt to $680 /nt) FOB mill.
As for demand, market sources say that it is still relatively soft due to the slumping residential construction market. However, demand from the industrial, energy, and commercial construction sectors remains decent. Due to demand from these sectors and the lack of imports arriving into the US, service centers report that inventories are slowly but surely decreasing, and MSCI inventory data support this, showing a decrease in inventories from March over February. The steel-on-hand supplies at the end of March represented a 3.1 months supply, down from 3.7 months in February. April and May data should show a similar trend. Even though it looks bleak right now, there is also a chance that US demand will pick up as more construction projects kick into gear this summer.
Also, it is believed that domestic mills will exercise production control in order to keep prices as stable as possible, which they showed they were able to do in the third and fourth quarters of last year. Another way the US mills are keeping the market from flooding is to export their excess production, primarily to the hot European market. Both Nucor and Arcelor Mittal now have programs to export HRC and CRC on a regular basis. There are also rumors circulating around the market that Arcelor Mittal may takeover AK Steel for $4.5 billion. Mittal already has a large share of the North American coated sheet market (it is one of the three major North American coated sheet suppliers to the automotive industry), and if the rumored takeover were to take place, this part of the flat rolled market would see significant consolidation and, thus, further price control.
Import prices are still trending slightly up, reflecting the strong foreign markets, though worldwide flat rolled pricing is inching up rather than rallying upwards in a hurry. Buying activity from the US is still very limited, as there are very few decent offers available, and US customers are only purchasing import steel if they need it for a specific application, since the delivery times from US mills are very quick and world prices are higher than domestic.
Import offers to the US for hot rolled coils range from $31.00 cwt. to $33.00 cwt. ($683 /mt to $728 /mt or $620 /nt to $660 /nt) FOB loaded truck, in US Gulf ports and from $33.00 cwt. to $35.00 cwt. ($728 /mt $772 /mt or $660 /nt to $700 /nt) FOB loaded-truck in US Gulf and West Coast ports for cold rolled.
Data from the US Import Administration continue to show that flat rolled imports to the US are down, year-on-year. During the first four months of 2007, hot rolled imports totaled 859,000 mt, compared to the 1,437 million mt of HRC imported during the same period of 2006, a 40 percent decrease. Cold rolled imports totaled 556,000 mt from January through April 2007, compared to 937,000 mt imported during the year-ago period, 41 percent decrease.