US domestic flat rolled prices continue their steady decline amidst falling busheling scrap prices, while the worldwide economic uncertainty leads to further buyer hesitation.
Even though there were no official announcements, hot rolled coil (HRC) domestic spot prices dropped about $2.00 cwt. ($44 /mt or $40 /nt) and cold rolled coil (CRC) prices slipped about another $1.00 cwt. ($22 /mt or $20 /nt) since our report last week.
Most domestic HRC spot prices now range from $42.00 cwt. to $46.00 cwt. ($926 /mt to $1,014 /mt or $840 /nt to $920 /nt) ex-mill in the Midwest; however, it is possible that some buyers could be getting offers as low as, or even slightly under $40.00 cwt. ($882 /mt or $800 /nt). It is difficult to establish a narrow range of HRC numbers -- As one trader told SteelOrbis this week, "Spot prices are all over the map right now."
The gap between HRC and CRC is still around $4.00 cwt. to $5.00 cwt. ($88 /mt to $110 /mt or $80 /nt to $100 /nt), as most CRC offers are ranging from $47.00 cwt. to $50.00 cwt. ($1,036 /mt to $1,102 /mt or $940 /nt to $1,000 /nt).
While buyers still have the opportunity to negotiate lower prices, the advantage of purchasing contract tons is waning. Busheling prices have registered close to a $280/long ton decline this month, and major flat rolled minimills should reflect some of this big drop in their contract prices. If the contracts are based on the CRU index price, however, the rapid declines in the spot price put the contract buyers at a disadvantage because the index is lagging behind the real prices by a considerable margin. The further and the faster the spot market price declines, the less beneficial contract offers will become.
The general demand for flat rolled products is, in a word, miserable. The automotive and residential construction markets continue to be soft, while the US economy is still in a deep "crisis," despite the recent acceptance of the financial bailout plan. In addition, with busheling scrap prices falling to such a large extent, more flat rolled price decreases might be in the cards for next month. For now, buyers seem content to just sit back and wait, unless it is absolutely necessary to buy. It is definitely a "buyer's market," but no one is really buying.
Mexico continues to be aggressive on HRC and CRC products, offering rates lower than the domestic levels. At the border crossing, Mexico is offering HRC to the US in the range of $41.00 cwt. to $43.00 cwt. ($903 /mt to $948 /mt or $820 /nt to $860 /nt), although that figure is expected to continue trending down for at least the next couple of weeks. Mexico is also offering an even greater discount on CRC, with offers ranging from $43.00 cwt. to $45.00 cwt. ($948 /mt to $992 /mt or $860 /nt to $900 /nt). Depending on the size of the order, Mexican mills are also willing to deliver the goods anywhere in the US, and even to Canada.
The overseas flat rolled markets continue to decline as well, resulting in cheaper import offers for the US. Chinese CRC offers are down by about $3.00 cwt. ($66 /mt or $60 /nt) for the second consecutive week. Chinese CRC offerings are now in the range of $46.00 cwt. to $48.00 cwt. ($1,014 /mt to $1,058 /mt or $920 /nt to $960 /nt) duty-paid, FOB loaded truck in US Gulf or West Coast ports.
Offers from India are still higher than those from China, but they have narrowed the price gap from about $3.00 cwt. ($66 /mt or $60 /nt) to around $1.00 ($22 /mt or $20 /nt). Indian offers for CRC now range from $47.00 cwt. to $49.00 cwt. ($1,036 /mt to $1,080 /mt or $940 /nt to $980 /nt) duty-paid, FOB loaded truck in US Gulf ports.