US flat rolled prices continue downward trend

Tuesday, 31 March 2009 20:38:49 (GMT+3)   |  
       

The US flat rolled market continues to be hampered by weak demand, which has led to another price decrease since last week.

The low end of the range for domestic hot rolled coil (HRC) spot prices declined by about $0.50 cwt. ($11 /mt or $10 /nt) from last week, and most offers can now be found anywhere from about $21.50 cwt. to $24.00 cwt. ($474 /mt to $529 /mt or $430 /nt to $480 /nt) ex-mill in the Midwest. Furthermore, SteelOrbis has learned that some domestic offers have been "kicked around" at as low as $21.00 cwt. ($463 /mt or $420 /nt), though there has yet to be any confirmation of transactions concluded at this price level.

Most domestic cold rolled coil (CRC) spot prices have also decreased by about $0.50 cwt. ($11 /mt or $10 /nt) on the low end of the offering range since last week, bringing most offers within the range of approximately $25.50 cwt. to $28.00 cwt. ($562 /mt to $617 /mt or $510 /nt to $560 /nt) ex-mill in the Midwest. However, customers may be able to negotiate below this range for orders of significant tonnage.

Prices will likely continue to trend slightly down over the coming weeks, as demand remains weak. In fact, according to the most recent Metal Service Center Institute (MSCI) monthly shipment and inventory report, demand may be worsening. Daily inventory shipments of flat rolled steel decreased from nearly 72,000 nt in January to 70,000 nt in February, and inventory overhang of product remaining in service center warehouses increased from an estimated 3.0 months in January to 3.2 months in February. However, this declining trend may not have continued too far into March; many flat rolled consumers have reported to SteelOrbis in recent weeks that they see their demand "bottoming out" or "leveling off" rather than continuing to decline sharply. Despite some reports that flat rolled activity picked up slightly in March, there is no question that overall flat rolled demand in the US remains weak. The import flat rolled market in the US is particularly soft, as traders continue to struggle to compete against domestic mills' shorter lead times and aggressive pricing. 

However, Mexico is one foreign source that continues to competitively and actively offer HRC to the US, primarily because of their proximity to US customers. Mexican mills have been able to keep pace with US mill price decreases, most recently matching the US domestic $0.50 cwt. ($11 /mt or $10 /nt) price decrease in the past week. Most HRC offers from Mexico now range from approximately $21.50 cwt. to $24.00 cwt. ($474 /mt to $529 /mt or $430 /nt to $480 /nt) delivered to the US at the border crossing, and in some cases, delivered to major cities in Texas and beyond. Mexican mills may also be more willing than US domestic mills to negotiate significant-sized orders for as low as $21.00 cwt. ($463 /mt or $420 /nt).

Meanwhile, while Venezuela and Turkey had been fairly active offering HRC to the US in February, both sources have become quiet recently as US domestic and Mexican prices continued to decrease. The largest Turkish flat rolled mill, Erdemir, is now looking to attract some buyers for May shipment from the US market and is collecting inquiries for hot rolled, cold rolled and galvanized products.

According to licensing data from the US Steel Import Monitoring and Analysis System (SIMA), there are currently zero reported hot rolled sheet imports from Turkey during March, compared to almost 15,000 mt in February.

On the CRC side, most price offerings from the most competitive foreign sources -- India, Mexico and Brazil -- trended neutral from last week and remain in the range of around $26.00 cwt. to $28.00 cwt. ($573 /mt to $617 /mt or $520 /nt to $560 /nt); however, Mexican and Brazilian mills are a little more aggressive than Indian mills, offering at the bottom of the range. The above listed Brazilian and Indian offers are duty-paid, FOB loaded truck in US Gulf ports, while Mexican offers are delivered to the US at the border crossing.

Furthermore, according to preliminary census data from the SIMA, Brazil exported 44,984 mt of cold rolled sheet to the US in February, which is over three times more than its previous monthly CRC import record over the past year, of 14,180 mt in February 2008.

Meanwhile, Chinese offerings of CRC to the US had not been competitive in recently weeks, with Chinese mills offering at about $2.50 cwt. to $5.00 cwt. ($55 /mt to $110 /mt or $50 /nt to $100 /nt) higher than other sources; however, the recently announced 13 percent value added tax (VAT) rebate on certain CRC products will most likely contribute to better offers in the coming weeks.


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