With most December books wide open, US flat rolled mills dropped prices a little further this week and are likely to become increasingly aggressive over the next few weeks.
The most competitive domestic spot offers for hot rolled coils (HRC) in the US market declined by about $1.00 cwt. ($22/mt or $20/nt since last week and most offers can now be mostly found in the range of $25.00 cwt. to $27.00 cwt. ($551/mt to $595/mt or $500/nt to $540/nt) ex-Midwest mills. HRC remains the weakest of the flat rolled products, mostly due to the continued deterioration of the pipe and tube markets. However, while prices are trending downwards, some mills are still managing to offer at the top of the abovementioned range to smaller customers. Nevertheless, larger customers are able to negotiate offers at the bottom of the range or sometimes below it.
US cold rolled coil (CRC) prices are also on a downward trend, with most domestic offers also falling by about $1.00 cwt. from last week; however, as with HRC, the higher end of the price range may still apply to smaller companies. Most current domestic spot offers of CRC are at approximately $30.00 cwt to $32.00 cwt. ($661/mt to $705/mt or $600/nt to $640/nt) ex-Midwest mills. While CRC has been a much stronger product than HRC in terms of demand over the past couple months, mills are now feeling the slowing effects of the coming holiday season.
Moving forward, domestic flat rolled pricing is expected to continue softening until mills are able to fill their December books, after which prices may be able to bounce back owards the end of the first quarter. This is assuming that inventory levels remain low, which may require that some production capacities be taken offline. According to the latest data from the Metals Service Center Institute (MSCI), while monthly flat rolled inventory at US service centers managed to remain under 3.00 million nt in September, inventory levels did increase from 2.76 million nt in August to 2.98 million nt in September, marking the first monthly inventory increase since August 2008. Months of inventory on hand were still extremely low at the end of September, at 1.9 months.
On the import side, activity is lethargic and has not changed much at all over the past week. The bottom line is that foreign offers are currently unable to compete with softening US domestic prices, and imports with a first quarter delivery still look pretty risky to buyers. Still, it is expected that some import hedge buying will take place in the next couple months as import lead times extend into spring 2010.
Currently, there are few import HRC offers, and nothing of significance from offshore sources. Mexican HRC continues to range from approximately $25.00 cwt. to $26.00 cwt. ($551/mt to $573/mt or $500/nt to $520/nt) delivered to the border crossing; however, their tonnage is available on a very limited basis.
Meanwhile, import CRC offers have remained neutral from last week. Offers from India and China are still hovering at around the very uncompetitive level of $34.00 cwt. ($750/mt or $680/nt) duty-paid, FOB loaded truck in US Gulf ports. While the Chinese domestic market has improved recently, some traders believe they may become a little more competitive with their offers to the US sometime next month. Mexico also has very limited CRC tonnage available, with offers still being seen at around $30.00 cwt. to $31.00 cwt. ($661/mt to $683/mt or $600/nt to $620/nt) delivered to the border crossing. Brazilian offers remain at around $34.00 cwt. to $36.00 cwt. ($750/mt to $794/mt or $680/nt to $720/nt) duty-paid, FOB loaded truck in US Gulf ports; however, their domestic market has also improved recently and as a result, they have very limited tonnage available for export to the US.
Item | US Domestic Spot Price | From Last Week | From Last Month | Pricing Trend | Comments | |
US domestic HRC | $26.00 cwt. ($573/mt) | down $0.50 cwt. ($11/mt) | down $1.00 cwt. ($22/mt) | L | ex-mill Midwest | |
US domestic CRC | $31.00 cwt. ($683/mt) | down $0.50 cwt. ($11/mt) | down $1.50 cwt. ($33/mt) | L | ex-mill Midwest | |