US flat rolled spot prices hit bottom in December, trending up for January

Domestic US flat rolled spot prices for December declined by about another $1.00 cwt. ($22/mt or $20/nt) within the past week; however, the bottom of the market appears to have been reached, as one mill has announced a January price increase and more are expected to follow.

Most domestic spot offers for hot rolled coils (HRC) in the US market are now ranging from approximately $24.00 cwt. to $26.00 cwt. ($529/mt to $573/mt or $480/nt to $520/nt) ex-Midwest mills, while the majority of US cold rolled coil (CRC) spot prices are currently being offered at around $29.00 cwt. to $31.00 cwt. ($639/mt to $683/mt or $580/nt to $620/nt) ex-Midwest mills. Customers looking to secure December shipment of product at the bottom of the range will have a limited window of time to book. Interest in first quarter flat rolled deliveries has been increasing in the past couple weeks, as has the sentiment about scrap prices, and mills have decided to take action.

While most mills are still aggressively trying to shore up December books by Thanksgiving, January offers appear to be heading in the opposite direction. Integrated US flat rolled steel producer AK Steel announced late last week that effective January 1, 2010 it will spot market base prices, on HRC by $20/nt ($1.00 cwt. or $22/mt) and CRC and coated products by $30/nt ($1.50 cwt. or $33/mt). Furthermore, US Steel is also rumored to be increasing January spot prices; however, this has not yet been confirmed While some distributors believe that flat rolled mills will have a difficult time actually receiving orders at the increased level because it is too abrupt of a change in the market, domestic mills have at least decided to stop the downward price drift that has characterized most of the fourth quarter and try to at least hold prices firm for the beginning of Q1.

It is quite possible, however, that the market could see a more significant bounce in January that is greater than AK Steel's initial increase. Buyers comment that the market is in a similar state as it was early last summer when the weak market was transformed into a solid one almost overnight after domestic mills started raising prices and shortening lead times again following months of softness. As was the case late last spring, most customer inventories are now down to bare-bones levels, and though end-use demand isn't stellar, there are many customers that need to buy some product and have just been waiting for prices to stop falling as their cue to start buying again.

Meanwhile, the import markets for HRC and CRC have remained very quiet over the past few weeks. For many buyers, import lead times are now actually too long to wait for, as their inventory is mostly depleted. Therefore, buyers who have the least amount of inventory will be looking to book January or February shipments from domestic mills for projects on their books for end of the first quarter. Furthermore, there is very little overseas interest in the US flat rolled market currently, as other markets, particularly in Asia, are willing to pay higher prices.

HRC import offers to the US remain very quiet, especially from offshore sources. The most viable HRC import source for the US is just across the border in Mexico; however, Mexican mills are not being very aggressive for orders, as they are mostly sold out well into January. Most Mexican mills offers are comparable with domestic HRC offers at a range of$24.00 cwt. to $26.00 cwt. ($529/mt to $573/mt or $480/nt to $520/nt) delivered to the border crossing.

All has remained quiet regarding CRC imports as well. Offers from India and China are still uncompetitive at around $34.00 cwt. ($750/mt or $680/nt) and higher, duty-paid, FOB loaded truck in US Gulf ports. Chinese offers are not likely to be competitive anytime soon, as their domestic market suggests import prices could increase further in the near term. In addition, Mexican CRC offers continue to be 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 with extremely limited tonnage availability, and Brazilian mills have pulled back and offers are no longer on the table.