The current state of the US flat rolled market is "crazy" according to just about anyone you ask, with prices rising across the board in a major way.
Following the giant leap that domestic scrap prices took this month, domestic flat rolled mills have since announced price increases of up to $80 /nt ($88 /mt or $4.00 cwt.). Nucor will raise its prices by $80 /nt for March orders, while AK Steel will raise its prices $80 /nt for February orders and has announced an additional $30 /nt ($33 /mt or $1.50 cwt.) increase for March orders. ArcelorMittal announced a $50 /nt ($55 /mt or $2.50 cwt.) increase for March orders, and is expected to announce an additional $35 /nt to $50 /nt for April orders.
Accordingly, spot prices have moved up by approximately $4.00 cwt. in the past two weeks, with most hot rolled offers on the market now ranging from $32.50 cwt. to $33.50 cwt. ($717 /mt to $739 /mt or $650 /nt to $670 /nt) FOB mill, while cold rolled offers range from $37.00 cwt. to $38.00 cwt. ($816 /mt to $839 /mt or $740 /nt to $760 /nt) FOB mill.
With imports out of the picture, the domestic mills can name their price, and customers are biting. A good amount of buying activity is taking place as panic sets in among many buyers worried about running out of inventories. Flat rolled prices are finally seeing the "volcanic recovery" that some had predicted would take place way back in October; however, there is no strong demand to back it up.
Although prices have skyrocketed upward so quickly in recent weeks, a common belief in the market is that, despite what mills have implied, there has been no improvement in end-use demand, and for this reason, this spike in pricing will not outlive the inventory replenishment stage that we are currently in.
Since, in the absence of strong demand, the main justification mills are giving for the price increases is the rising raw material costs, after this most recent round of price increases, mills aren't expected to raise their numbers again unless scrap prices increase further. With scrap forecasted to remain relatively stable in the coming months, with perhaps a slight downward correction being registered, domestic flat rolled prices will probably have reached their peak once this current round of price increases is absorbed.
However, anything is possible; as US production is not sufficient to meet all of the domestic flat rolled demand, until imports return, domestic mills can name their price. Mills probably wouldn't want to risk raising their prices so high that imports would be competitive again, though. For now, since spot prices still do not register the entire amount of mills' price increases, the pricing trend for domestic flat rolled is still up.
There have been no new import offers seen in the past two weeks, and, reacting to the large price increases in the US market, overseas mills (mostly Chinese cold rolled suppliers) have withdrawn their offers and are in many cases trying to renegotiate their already agreed-upon offers. When the Chinese cold rolled mills return to the market with new offers, they are expected to be $50 /nt to $100 /nt higher than their previous offering level.
In recent months, other than the Chinese cold rolled and galvanized imports, the only flat rolled imports that have arrived to the US are specialty items, cross-border imports from Canada and Mexico, and hot rolled tonnage that international steel mills have bought from their sister/parent companies overseas - in other words, re-rollers selling to themselves. Looking at December 2007 license data from the US Import Administration, out of the 226,366 mt of import hot rolled that arrived, 99,645 mt was from Canada, 51,964 mt was from Australia (most of which was likely for Steelscape and Ternium), 27,999 mt was from South Korea (for USS POSCO), 12,463 mt was from Sweden (for IPSCO), and 12,013 mt was from Netherlands (Corus). Cold rolled imports in December totaled 79,200 mt, including 25,953 mt from Canada, 24,539 mt from China, 7,468 mt from Sweden (probably specialty items), and 6,447 mt from Japan (also specialty).
Buyers say that they don't expect to see more hot rolled import offers anytime soon due largely to the weak dollar and high ocean freight rates, despite the rising US domestic prices. On the cold rolled side, China is expected to continue offering, and India is said to be ready to offer value-added, cold rolled and galvanized material to the US.