Weak scrap market likely to take a toll on US HDG prices

Despite some emerging bright spots in the US flats market, an expected drop in scrap prices this month will likely push US domestic coated flat steel prices down further. Sources tell SteelOrbis that spot business picked up slightly in the last week or two as buyers began replenishing inventories that have been reduced in recent weeks due to softening spot prices. Further, US raw steel production has fallen 4.1 percent in the last three weeks after fluctuating upward the last couple months, according to AISI data. While it is uncertain whether the trend will continue, if steel production is curbed further, it could add a much needed boost to US hot dipped galvanized (HDG) and Galvalume buying activity.

On the other hand, in addition to generally still high production levels and buyers' ongoing reluctance to stock inventories, a major drop in domestic scrap prices this month will exert tremendous pressure on flat steel prices. In the last week, the US domestic HDG and Galvalume base price of $36.00-$37.00 cwt. ($794-$816/mt or $720-$740/nt) ex-Midwest mill has remained unchanged, but most spot purchases are taking place under $37.00 cwt. The same is true for HDG 0.012"x40.875" G30, where SteelOrbis has heard offers from certain mills under the general range of $46.00-$47.00 cwt. ($1,014-$1,036/mt or $920-$940/nt) ex-Midwest mill.