In recent weeks, a standoff had emerged in the US flat rolled market between US mills and buyers. Mills were reluctant to lower prices; however, demand continued to be worse than expected. As we enter the second month of the year, the standoff appears to be leaning towards the buyers' side again, as the weakness in demand may be too great to sustain price levels.
Domestic hot rolled coil (HRC) spot prices, on average, trended slightly down over the past week, by about $1.00 cwt. ($22 /mt or $20 /nt), and are now in the approximate range of $24.00 cwt. to $26.00 cwt. ($529 /mt to $573 /mt or $480 /nt to $520 /nt) ex-mill in the Midwest. Most transactions are happening at the bottom of this range. However, while quick delivery orders for significant tonnage may be able to warrant discounts from mills, most mills are reluctant to sign off on long-term discounted deals.
Similarly, most domestic cold rolled coil (CRC) spot prices also decreased in the last week by about $1.00 cwt. and are in the new range of about $29.00 cwt. to $31.00 cwt. ($639 /mt to $683 /mt or $580 /nt to $620 /nt) ex-mill in the Midwest.
It may be difficult to believe that prices will trend much further downward in the coming weeks, as mills have cut so much production and idled so many furnaces. One might not think that there is much room left to drop, but demand appears to be worsening month by month and busheling scrap prices are expected to decline by about $30 /lt to $40 /lt in February. For scrap based mills, this means raw material surcharge will decline, and there is no reason (i.e. demand) why the mills would able to maintain their prices while scrap is declining.
The forecast doesn't appear to be much brighter on the import side either. The overall price trend appears to be softening for the majority of foreign countries; however, many traders are eager to see what type of action the Chinese will take over the next week or two after being idle for the Lunar New Year. To some buyers' relief, the first indications are that the Chinese market is holding up fairly well. However, the next few weeks will determine whether the strength is only temporary or if it will be a trend for the next few months.
Mexico and Turkey appear to be the most competitive countries offering HRC to the US, in the range of about $23.00 cwt. to $25.00 cwt. ($507 /mt to $551 /mt or $460 /nt to $500 /nt), after a decrease of around $1.00 cwt. ($22 /mt or $20 /nt) from the previous week. Mexico offers are delivered to the US at the border crossing, while Turkish offers are duty-paid, FOB loaded truck in US Gulf ports.
On the CRC side, Mexico, Brazil and Argentina are the most aggressive importers and have decreased their offers by about $1.00 cwt. from the previous week, to the new range of approximately $27.00 cwt. to $29.00 cwt. ($595 /mt to $639 /mt or $540 /nt to 580 /nt). Venezuela and Turkey have also been showing limited activity within this range. Mexico's offers are delivered to the US at the border crossing, while the South American and Turkish offers are duty-paid, FOB loaded truck in US Gulf ports.
Meanwhile, Indian mills have kept their prices firm for the time being and remain in the range of about $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.
Licensing data from the US Steel Import Monitoring and Analysis System (SIMA) demonstrate that Canada exported the most tonnage of HRC to the US in January with an estimated 40,409 mt, after being the second largest exporter with 30,362 mt in December 2008. Australia, who was the largest exporter in December 2008 with 36,972 mt, was the third largest exporter in January with an estimated 20,477 mt. South Korea was the second largest exporter of HRC to the US in January with 28,301 mt.
According to the licensing data, Mexico was the largest exporter of CRC to the US in January with approximately 14,964 mt, after not being in the top three throughout the majority of 2008. Canada was the second largest importer with 13,871 mt, slightly ahead of China with 13,282 mt.