US flat rolled market remains under pressure

US flat rolled mills are still trying to keep prices as firm as possible; however, the market continues to come under pressure from weak demand and falling scrap prices, and another domestic price decrease is likely on the horizon.

For now, most domestic spot offers for hot rolled coils (HRC) in the US market continue to range from $26.00 cwt. to $27.00 cwt. ($573/mt to $595/mt or $520/nt to $540/nt) ex-Midwest mills. Larger buys with certain stipulations may be able to command further discounts, but most customers will not see anything lower than $26.00 cwt. at this point. Over the next couple weeks, due to downward scrap pressure and the slow holiday season, mills may be forced to decrease prices by as much as $1.50 cwt. ($33/mt or $30/nt); however, they will likely seek to keep prices above the $25.00 cwt. ($551/mt or $500/nt) threshold.

Most domestic CRC offers have also remained unchanged from last week. The majority of US CRC offers remain at approximately $31.00 cwt to $32.00 cwt. ($683/mt to $705/mt or $620/nt to $640/nt) ex-Midwest mills. CRC has been a much stronger product than HRC in terms of demand; however, now that the holiday season is almost here, CRC demand has weakened as well. If mills lower prices in November as expected, it will likely be the last decrease of the year, as mills are well aware that lower prices in December will not result in more orders. However, domestic flats prices are not expected to pick up any upward momentum again until the end of the first quarter.

On the import side, activity remains subdued. Foreign sources remain mostly uncompetitive across the board on both HRC and CRC, and the continued softening of the domestic market forces buyers to be even more cautious as regards imports. Traders are also wary of doing many speculative buys, since even if they can get a great deal for delivery mid-first quarter, there is no guarantee that they will still be able to sell it at that time.

There currently aren't any legitimate HRC offers from offshore sources. Mexico continues to be the primary source offering HRC to the US, with most offers continuing to range from approximately $25.00 cwt. to $26.00 cwt. ($551/mt to $573/mt or $500/nt to $520/nt) delivered to the border crossing.

CRC offers to the US have trended neutral from last week. Offers, from India and China can still be found at around $34.00 cwt. ($750/mt or $680/nt) duty-paid, FOB loaded truck in US Gulf ports, while Brazilian offers remain at around $34.00 cwt. to $36.00 cwt. ($750/mt to $794/mt or $680/nt to $720/nt) duty-paid, FOB loaded truck in US Gulf ports. Most Mexican offers are hovering around $30.00 cwt. to $31.00 cwt. ($661/mt to $683/mt or $600/nt to $620/nt) delivered to the border crossing.

Preliminary census data from the US Department of Commerce demonstrate that HRC exports to the US increased for the third consecutive month in September and increased from 121,466 mt (final data) in August to 148,249 mt in September. September's increase was largely driven largely by the top three exporters of Canada, at 59,860 mt; Australia, at 31,275 mt; and Korea, at 25,728 mt. Still, much of these tons are likely attributable to foreign-owned US flat rolled producers, seeking to take of advantage of the up-tick in CRC and HDG markets in the second and third quarters, buying HR substrate from their offshore parents.

Meanwhile, CRC imports by the US also increased for the third consecutive month in September, though less sharply than HRC imports. CRC imports increased from 59,637 mt in August to 73,310 mt in September. The top exporters of CRC to the US were spread out a little more evenly than on the HRC side, with the most tons coming from Brazil, at 28,355 mt; Canada, at 18,099; Mexico, at 8,188 mr; and Japan, at 7,292 mt.