Just a couple weeks ago there were many questions surrounding whether US flat rolled mills would be able to sustain their first sizable price increase this year. Now, buyers may no longer be able to book at even last week's price, as most domestic mills have announced further price increases.
After quickly filling their July books on the heels of their minimum $30 /nt ($1.50 cwt. or $33 /mt) price increase announced earlier this month, US mills looked to capitalize on the upward momentum with another wave of price hikes last week on hot rolled coil (HRC), cold rolled coil (CRC) and hot dip galvanized (HDG) products ranging from $30 /nt to $90 /nt ($1.50 cwt. to $3.50 cwt. or $33 /mt to $99 /mt) depending on product and mill.
Nucor, which usually sets the pricing benchmark for others to follow, announced a minimum $30 /nt ($1.50 cwt. or $33 /mt) increase effective immediately on both HRC and CRC. However, a couple days prior to Nucor's announcement, ArcelorMittal USA had announced steeper price increases of $50 /nt ($2.50 cwt. or $55 /mt) on HRC and $70 /nt ($3.50 cwt. or $77 /mt) on CRC. While these increases seemed a bit bold at the outset, buyers are beginning to realize that prices are heading in that direction, quickly.
For the first time all year, US flat rolled buyers need to take quick action in order to get the best possible pricing. While domestic HRC spot offers were seen at around $20.00 cwt. ($441 /mt or $400 /nt) ex-mill earlier in the month, they rose to at least $21.00 cwt. ($463 /mt or $420 /nt) ex-mill following the first round of price increases this month. Now that the second round of increases has been announced, some distributors expect HRC spot prices to be seen at around $23.00 cwt. ($507 /mt or $460 /nt) ex-mill imminently. Meanwhile, CRC spot deals are also climbing at around the same pace as HRC, and can currently been found for around $25.00 cwt. ($551 /mt or $500 /nt) ex-mill. Given the market's upward momentum, CRC offers could also soon rise to the $28.00 cwt. ($617 /mt or $560 /nt) price that ArcelorMittal set. One buyer said to SteelOrbis, regarding the US flat rolled mills, "I applaud them for taking a stand and trying to get back in the black for third quarter."
Domestic mills are discounting much less frequently even with their most loyal and largest customers, and most are standing firm on their announced price increases and are even turning away some business. Furthermore, domestic lead times have stretched to about six weeks or more --their longest span since last summer -- while Nucor is currently telling most customers that they are not accepting offers on deliveries until the end of August.
Nonetheless, while the US flat rolled market has definitely turned around in recent weeks, there still has to be concern over the lack of demand. According to the most recent Metal Service Center Institute (MSCI) monthly shipment and inventory report, daily and monthly shipments of flat rolled products declined in May from April. Monthly shipments declined from 1.48 million nt in April to 1.34 million nt in May, while daily shipments slightly decline from April to May, at 67,200 nt to 66,800 nt respectively. However, May inventories decreased from 3.72 million nt in April to 3.37 million nt in May. With prices on the rise, US mills are expected to begin increasing production, which could be an issue again if the underlying demand doesn't increase along with it. Some distributors believe that prices may fall back a little by the end of the fourth quarter if end-use demand doesn't demonstrate at least some signs of improvement. There is a lot of commercial activity and excitement in the market currently, but it remains to be seen if this is just a short-lived period of steel service center restocking or if actual consumption is finally picking up.
Meanwhile, import offers of flat rolled products to the US have been very quiet. Over the last couple weeks there have been virtually no import HRC offers to the US. Venezuelan offers haven't been seen over the last several weeks, while Mexican mills have informed US customers that their books are full and are not offering at this time.
On the CRC side, China has increased their offers by about $1.00 cwt. ($22 /mt or $20 /nt) over the past week, and offers now range from approximately $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. Brazilian and Korean CRC offers have remained firm for now for now, at about $26.00 cwt. to $28.00 cwt. ($573 /mt to $617 /mt or $520 /nt to $560 /nt) and $33.00 cwt. to $35.00 cwt. ($728 /mt to $772 /mt or $660 /nt to $700 /nt) respectively. The above Brazilian offers are duty-paid, FOB loaded truck in US Gulf ports, while Korean offers are duty-paid, FOB loaded truck in West Coast ports.
Furthermore, license data from the US Department of Commerce show that HRC imports to the US decreased from 118,487 mt in April to 101,103 mt in May. The top four exporters of HRC to the US in April were: Canada, at 37,873 mt; Korea, at 28,268 mt; Mexico, at 11,474 mt; and Netherlands, at 10,410 mt. Only Korean HRC imports increased in May from April, totaling 29,269 mt in May. The other three top import sources for HRC in May: were Canada, at 29,923 mt; Mexico, at 8,347 mt; and Netherlands, at 6,138 mt.
License data on CRC imports also demonstrates a significant decline in imported tonnage from April to May, from 95,382 mt to 57,496 mt respectively. The top five CRC exporters to the US in April were: Brazil, at 20,572 mt; Russia, at 17,325 mt; Mexico, at 13,098 mt; Belgium, at 13,050 mt; and Canada, at 12,518 mt. Imports from all five countries registered significant declines in May, with imports from Brazil totaling 5,511 mt; Russia, at 0 mt; Mexico, at 5,844 mt; Belgium, at 1,945 mt; and Canada, at 8,694 mt.