While US flat rolled prices have continued increasing even through the holiday weeks, actual demand is still not yet at levels comfortable enough for most buyers to build inventory much beyond what they need.
Flat rolled spot prices on both hot rolled coil (HRC) and cold rolled coil (CRC) climbed about another $1.00 cwt. ($22/mt or $20/nt) since our last report two weeks ago, and more increases are expected to continue over the next couple weeks, mostly as a result of the current momentum of scrap prices.
Currently, most US domestic spot offers for HRC can now be found from approximately $28.00 cwt. to $29.00 cwt. ($617/mt to $639/mt or $560/nt to $580/nt) ex-Midwest mills. While some larger customers with significant tonnage may still be able to get deals at $27.50 ($606/mt or $550/nt), these offers are dwindling fast and most mills probably will no longer accept below $28.00 cwt. ($617/mt or $560/nt) by this time next week. With the latest increase, CRC spot offers are currently at about $33.50 cwt. to $34.50 cwt. ($739/mt to $761/mt or $670/nt to $690/nt) ex-Midwest mills. Buyers will have less luck trying for discounts on CRC because it remains a tighter market than HRC. Nevertheless, despite rising prices, mills have yet to see a rush of buying activity. Most mills still have lead times for February.
The flat rolled market continues to be primarily cost- and supply-driven rather than reflective of a strong demand. While demand has increased slightly over the past couple months many buyers have been expressing concerns that despite the rising prices, demand has not increased to where they expected. Some customers have been doing some hedge buying since the beginning of December in anticipation of rising prices; however, others are playing a more defensive game, still buying only what they need. Many buyers are extremely cautious especially after just experiencing one of the worst years in the steel market history. "I would rather have to pay an extra dollar (per hundredweight) on each purchase right now than load up with no place to sell," one buyer remarked SteelOrbis. Furthermore, there is a chance that scrap prices will fall back a little within the next month or two; and if that happens, flat rolled market prices will most likely drop again.
On the import side, activity is still quiet. However, foreign sources may be able to claim a larger portion of buyers if they can keep prices neutral while US domestic prices rise. But raw material and flat rolled prices have also been rising in the domestic markets of most foreign sources, which, combined with the weak US dollar, make it difficult to compete in the US market.
There are very few HRC import offers in the US market right now. Some HRC is still being offered from Mexico, though on an extremely limited basis. Mexican mills are not really pushing for US bookings right now but their range is expected to be at approximately $29.00 cwt. ($639/mt or $580/nt) delivered to the US border, and higher, within the next week. However, Turkey and some European sources have begun to test the waters a little and may start to become competitive. Similarly for the CRC market, traditional sources such as India and China are less competitive, while European offers are gaining some attention. Other offshore flat rolled sources such as Brazil and Venezuela remain, for all intents and purposes, out of the US market right now as the Latin American markets remain much stronger than that of the US.
License data from the US Department of Commerce demonstrate that monthly HRC exports to the US decreased from 172,190 mt (preliminary census data) in November to 119,326 mt in December. The two largest exporter declines during the period were from Korea, which dropped from 55,290 mt to 29,240 mt and Netherlands, declining from 21,233 mt to only 2,596 mt.
Meanwhile, license data indicates that monthly CRC exports to the US increased in December, from 65,986 mt (preliminary November census data) to 78,524 mt. The top three exporters of CRC to the US during December were Canada, at 17,278 mt; Belgium, at 13,211 mt; and Brazil, at 11,514 mt.