US flat rolled prices have registered another decline over the past week, but the actions many domestic mills are taking should soon reveal the market's bottom.
Most domestic hot rolled coil (HRC) spot prices have declined by about another $1.00 cwt. ($22 /mt or $20 /nt) since the report for the week before, the smallest decline seen in recent weeks, and now range from approximately $27.00 cwt. to $29.00 cwt. ($595 /mt to $639 /mt or $540 /nt to $580 /nt) ex-mill in the Midwest. SteelOrbis has learned that buyers may be able to contract domestic HRC at the low end of this range, and perhaps at even a bit lower if they request significant tonnage and the mill has the available inventory.
Most domestic cold rolled coil (CRC) spot price offers also fell by about another $1.00 cwt. ($22 /mt or $20 /nt) from our report of a week ago and are now in the range of about $32.00 cwt. to $34.00 cwt. ($705 /mt to $750 /mt or $640 /nt to $680 /nt).
With all of the production cuts, domestic mills are about to close their December 2008 books, although buyers are still demanding and receiving moderate price declines. Many buyers are trying to lock in rates at today's levels for anywhere between three and six months, primarily because they believe prices will most likely rebound soon.
According to the latest Metal Service Center Institute (MSCI) inventory report, US service center steel inventories in October totaled about 10 million tons, which is 4.3 percent below year-ago totals. However, October 2008 inventories equate to about a 2.8-month supply at current shipping rates, which is an increase of 0.6 months from October 2007, due to the weak state of service center shipments. Inventories are low, but the current shipments are lower, and therefore, inventories are stretched further.
Buyers are getting comfortable with the price levels and they do not think the prices will decline much further. However, buying decisions are still difficult to make. Credit remains an issue and the real possibility of their customers encountering financial difficulties keeps some buyers from making big purchases.
Many countries are offering import flat rolled products to the US but their rates are not competitive enough to generate serious interest. In a declining market like this, import offers need to be at least $50 /nt ($2.50 cwt. or $55 /mt) less than the current asking prices to make sense.
Turkish mills, which have been quiet in the import flat rolled market over the last few years, have recently become more aggressive and, after a week of steadily lowering their prices, are now offering CRC within the range of $28.00 cwt. to $30.00 cwt. ($617 /mt to $661 /mt or $560 /nt to $600 /nt), duty-paid FOB loaded truck in US Gulf ports.
Mexico and China lowered their CRC offerings by about another $3.00 cwt. ($66 /mt or $60 /nt) over the past week and are now within the range of $31.00 cwt. to $33.00 cwt. ($683 /mt to $728 /mt or $620 /nt to $660 /nt). Mexico's offers are delivered to the US at the border crossing, while China's offers are duty-paid, FOB loaded truck in US Gulf or West Coast ports.
Mexico's HRC offers remain within the range of $27.00 cwt. to $30.00 cwt. ($595 /mt to $661 /mt or $540 /nt to $600 /nt), delivered to the US at the border crossing.
Russia remained competitive with Mexico's HRC import prices by lowering their offers by about $1.00 cwt. ($22 /mt or $20 /nt) and are now within the range of $27.00 cwt. to $29.00 cwt. ($595 /mt to $639 /mt or $540 /nt to $580 /nt), duty-paid FOB loaded truck in US Gulf ports.
India lowered its prices as well, by about $2.00 cwt., ($44 /mt or $40 /nt), and are offering CRC to the US in the range of $32.00 cwt. to $34.00 cwt. ($705 /mt to $850 /mt or $640 /nt to $680 /nt) duty-paid, FOB loaded truck in US Gulf ports.
Brazil have decreased their import CRC offers by about $1.00 cwt. ($22 /mt or $20 /nt) since a week ago and are now in the range of about $36.00 cwt. to $38.00 cwt. ($794 /mt to $838 /mt or $720 /nt to $760 /nt) duty-paid, FOB loaded truck in US Gulf ports.
All in all, flat rolled market prices have basically come full circle from last year at this time, with most product prices at similar levels to last year's. We haven't turned the corner yet, but it looks like we are getting closer to the end of the current slump to begin a new, positive cycle.