The US semis market conditions have not changed significantly since last month: the market remains tight with low supply levels.
The tight slab supply and the soaring hot rolled coil prices have allowed slab prices to stay high. However, it is believed that slab prices are close to peaking since the flat rolled market has started losing some steam in the last month.
In the fourth quarter, market sources predict that although slab demand may soften some, prices will not register a significant drop, as new slab supply will not be coming online before 2009, and the high raw materials prices are also expected to continue. In addition, the slowing US economy is expected to continue through the rest of the year, making slab buyers less than keen to pay price increases. Right now slab inventories are low, but this is how buyers like them to be.
US buyers are currently seeing slab prices from Russia at about $1,100 /mt, from Brazil at $1,050 /mt and from India, at $1,050 /mt to $1,100 /mt FOB stowed at the origin. Mexico is also reported to be selling slabs at $1,000 /mt FOB stowed for commercial grade slabs. For plate-making slabs, however, the demand is still strong and prices are higher. The higher plate prices allow for a decent margin for the plate producers even though they have to pay slightly higher slab prices for plate and API grades.
The high slab prices didn't seem to curtail the imports much; only a slight decrease has been registered for slab imports as of the end of the second quarter. The total amount of slabs imported into the US during the second quarter was 1,242,225 mt, which is 2,467 mt less than in the first quarter.
The largest quantities of import slabs arriving in the US during the second quarter of 2008 came from Ukraine, at 302,453 mt; Mexico, at 229,687 mt; Brazil, at 218,722 mt; Russia, at 192,300 mt; and Canada, at 189,575 mt. Other smaller slab sources during this period included Japan, India, Australia and Italy.
Current US billet prices are at approximately $1,014 mt ($920 /nt or $46 cwt.) ex-works. The high prices are attributable to the soaring scrap prices as well as the low billet availability.
Billet prices have been moving upward along with scrap prices since the beginning of this year. Today's billet prices show an increase of approximately $400 /mt when compared to the prices in January, which were approximately $620 /mt delivered.
Still, the US prices are much lower than international prices so that there is great interest from traders to export. International billet prices keep increasing as well. At the end of June, CIS origin 3SP-5SP billets were being offered for export at $1,190-1,210/mt FOB Black Sea for late August/early September shipments. In Turkey, current billet export offers are at a price level of $1,270 to $1,300/mt FOB for September shipment.
The amount of US billet exports is increasing, while US billet imports are decreasing. April saw double the amount of billet exports from the US when compared to March. Data from the USITC show that the total amount of US carbon billet exported in April was 8,898 mt, which is 4,670 mt more than the amount of billet exports in March 2008.
Meanwhile, the total amount of billets imported into the US went down from 83,614 mt in the first quarter to 66,889 mt in the second quarter, showing a decrease of 16,725 mt. The most recent data from the US Steel Mill Import Monitor show that during the second quarter of 2008, the US mainly imported billets from: Canada, at 30,818 mt; Brazil, at 19,501 mt; and Mexico, at 13,549 mt. Japan, Belgium, Switzerland and Austria also exported some billet tonnages to the US during this period.