The pricing trend for domestic flat rolled products is now slightly down, with prices sliding approximately $1.00 cwt. ($22 /mt or $20 /nt) in the past three weeks.
Most domestic offers on the market for hot rolled coils now go for $27.50 cwt. to $29.50 cwt. ($606 /mt to $650 /mt or $550 /nt to $590 /nt) ex-mill, while most cold rolled offers go for $31.00 cwt. to $33.00 cwt. ($683 /mt to $728 /mt or $620 /nt to $660 /nt) ex-mill.
As we reported three weeks ago, only $20 /nt of the $60 /nt ($66 /mt or $3.00 cwt.) May price increase announced by the domestic flat rolled mills was accepted by the market, as raw material prices have come off their peak and demand for flat rolled products remains soft.
Inventory correction at steel service centers continues, as the Metals Service Center Institute (MSCI) reported last week: In April, steel service center inventories declined to 14.6 million net tons, the lowest level since May 2006.
However, flat rolled inventories are still at high enough levels and so customers are in no danger of running out of steel anytime soon. As reported by MSCI, in April 2007 inventories were still 4.5 percent greater than they were in April 2006. Service center shipments continued to trend down for the eighth consecutive month in April, and were 1.5 percent lower than the year-ago levels. At current shipping rates, steel product inventories in April represented a 3.2-month supply, up slightly from March.
Purchasing activity continues to be slow due to the still-high inventories as well the depressed housing market and the general slowdown of the US economy. Domestic mills are doing their part to control production - data from the American Iron and Steel Institute (AISI) show that year-to-date raw steel production in the US as of May 19 totaled 39.8 million net tons, down 7.2 percent from the 42.9 million net tons produced during the same period of 2006.
Also, both the Iron and Steel Statistics Bureau (ISSB) and MEPS International record that steel production among the North American Free Trade Agreement (NAFTA) countries fell by eight percent in the first quarter, while NAFTA steel production is forecasted to decline by approximately 4.5 million net tons, or 3.5 percent, in 2007. However, despite the cutback in production, as well as the lack of import arrivals this year, domestic flat rolled prices are currently unable to rise because of the weak demand.
Market sources tell SteelOrbis that HRC is currently the strongest among the flat rolled products, while CRC is the weakest. The HDG market may be helped slightly by auto production - while US auto sales are still not particularly strong, vehicle production continues, though manufacturers must slash prices in order to move units. As we reported last week in our US economic overview, in April a total of 923,517 units were produced, slightly ahead of last year (+ 0.9%). General Motors' sales declined 9.5 percent in April, compared to Ford's 13.0 percent. Even Toyota's sales dropped 4.3 percent. Daimler's Chrysler division eked out a gain of 1.6 percent in April sales.
While economic factors are keeping domestic flat rolled prices from rising, the world market for flat rolled products is still good, with import prices still trending slightly up. However, the upward pricing trend in the global flat rolled market is starting to slow down some, and import prices may not be able to rise too much further, especially since US orders have been so light. Sources say that offering prices of galvanized coils from India and Brazil have both come down slightly. Also, China's biggest flat rolled export to the US - cold rolled coils - are having trouble finding homes in the US, with demand being so slow. Still, GDP growth in the European markets continues to outshine US GDP growth, and steel prices will continue to reflect that. The recent rallying of the global steel market and of the flat rolled market in particular - despite the weakness of the US steel market, not to mention the US dollar - has demonstrated that the health of the world steel market does not depend on the US market. Since global prices are still above US prices, US mills like Nucor and Mittal continue to export flat rolled products at significant quantities.
On the whole, import HRC and CRC offering prices have remained stable since our last report, with hot rolled coils still ranging 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 cold rolled coils still going for $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.