This week, US flat rolled mills have made it very clear to customers that they are determined to finally raise prices in July, after months of steady declines. Virtually all US flat rolled mills announced similar price increases over the past week, in rapid succession.
After domestic hot rolled coil (HRC) prices breached the $20.00 cwt. ($441 /mt or $400 /nt) mark at the beginning of May, few buyers were optimistic that the bottom was near. But less than one month later, it appears that the bottom has finally been reached, and domestic mills are trying to make sure that prices are now above that psychological threshold.
Last week, Nucor announced that it would raise its transactional spot prices on flat rolled by a minimum $30 /nt ($1.50 cwt. or $33 /mt) effective with order shipments beginning July 5, and many other domestic flat rolled mills followed suit in the following days.
The price increase triggered reluctant buyers to rush their HRC orders that were booked at the previous level of about $19.00 cwt. to $21.00 cwt ($419 /mt to $463 /mt or $380 /nt to $420 /nt) ex-mill in the Midwest. It remains to be seen if the mills will give in and book some July deliveries at the old price. However, the chances are great that they will try to draw the line in the sand and get ready for another increase in August. The mills will likely seek more price recovery than just the $30 /nt July hike. Cold rolled coil (CRC) offers will also be affected, but for now, they still remain at the same range of last week, i.e. $22.00 cwt. to $24.00 cwt. ($485 /mt to $529 /mt or $440 /nt to $480 /nt) ex-Midwest mills.
Now the tricky part is for all domestic mills to stay firm on pricing and to refuse lower offers. Scrap prices are expected to fall back by about $20 /lt from last month's increase and flat rolled demand still remains weak, which could tempt domestic mills to accept quick orders of significant tonnage at below their asking spot prices. But once one deal is negotiated, the word will inevitably out and other customers will want the same treatment. If that scenario comes true, prices could lose their momentum.
ArcelorMittal is attempting to thwart this from the start by issuing a letter to its sales team stating its bottom base price throughout the month of July will be $410 /nt ($20.50 cwt. or $452 /mt) on HRC and $490 /nt ($24.50 cwt. or $540 /mt) on CRC and HDG. Furthermore, domestic mills may be inclined to issue another price hike over the next month just to make sure that the current one actually sticks.
On the import side, prices have remained the same as last week, but are trending slightly up on the whole. US mills are still very price-competitive against imports and other major markets seem to be doing better, price-wise. However, the primary setback for imports continues to be their long lead times and uncertainty about the market's future over the next few months. Even if a buyer were to get a significant price break on import tonnage, it still would probably not be worth the risk in this volatile market. Buyers prefer to see steady demand and rising domestic prices before they commit to imports in a major way.
Of the few HRC and CRC import offers that are still generating interest, Mexico continues to be the primary foreign source offering to the US, although their mills are already mostly full through July. Nonetheless, there are still some scattered HRC offers from Mexico ranging from around $18.00 cwt. to $20.00 cwt. ($397 /mt to $441 /mt or $360 /nt to $400 /nt) and CRC offers ranging from $23.00 cwt. to $25.00 cwt. ($507 /mt to $551 /mt or $460 /nt to $500 /nt) at the US border crossing.
Venezuela may also be offering HRC at around $18.00 cwt. to $20.00 cwt. ($397 /mt to $441 /mt or $360 /nt to $400 /nt) duty-paid, FOB loaded truck in US Gulf ports; however, with greater lead times.
As for the other primary CRC offers to the US, there remains some Brazilian offers, which have trended sideways, at a range of $24.00 cwt. to $26.00 cwt. ($529 /mt to $573 /mt or $480 /nt to $520 /nt) duty-paid, FOB loaded truck in US Gulf ports, while Chinese offers also trended sideways and can be found for around $25.00 cwt. to $27.00 cwt. ($551 /mt to $595 /mt or $500 /nt to $540 /nt) duty-paid, FOB loaded truck in US Gulf ports.
The most recent license data from the US Department of Commerce show that HRC imports to the US will continue to record significant monthly decreases in May, at 95,186 mt. The previous three total monthly imports of HRC to the US for February, March and April were at 151,646 mt, 140,557 mt and 113,354 mt respectively. Korea, Canada and Australia imported the most import tonnage to the US in May, at 29,239 mt, 24,947 mt and 11,805 mt respectively.
Meanwhile, CRC imports to the US decreased drastically in May from April, at 56,027 mt and 94,836 mt respectively. The top three importers of CRC to the US in May were, Japan, Mexico and Brazil, at 6,821 mt, 5,655 mt and 5,511 mt respectively.