Things appear to have taken a turn for the worse in the US domestic hollow structural section (HSS) market over the past couple of weeks, as weak demand levels have failed to improve and scrap prices have fallen, thus softening tubing offering prices.
December was a brutal month for the US tubing market, as domestic prices fell by more than $11.00 cwt. ($243 /mt or $220 /nt). According to the Metal Service Center Institute (MSCI)'s monthly shipment and inventory report, service center pipe and tubing inventories dwindled to their lowest level in over two years in December. Meanwhile, inventories were sitting in warehouses for an average of four months, which was the highest average in over two years. However, domestic tube prices appeared to be leveling out in January, primarily on the prospect of an imminent improvement in demand. But by early February, busheling scrap prices had declined by $30 /long ton and tubing demand continued to remain weak. These factors are expected to force mills to push prices down further over the next week.
For now, official domestic HSS prices at the mill level remain unchanged from January levels, with most offers found in the approximate range of $39.00 cwt. to $41.00 cwt. ($860 /mt to $904 /mt or $780 /nt to $820 /nt) for A500 grade A and grade B hollow sections up to 6" ex-mill in the Midwest; however, prices are expected to decline by about $1.00 cwt. to $1.50 cwt. ($22 /mt to $33 /mt or $20 /nt to $30 /nt) over the next week, and some areas of the country may already be experiencing this price adjustment.
Furthermore, many traders are taking the term "official transaction prices" with a grain of salt; as one trader told SteelOrbis, "There really is no official transaction price. If someone actually wants product, they will most likely be able to negotiate for it."
After this price adjustment, domestic tubing prices will likely continue to remain soft and trend neutral to slightly down until there is evidence of demand picking up, which could be later rather than sooner.
On the import side, most mills are struggling to stay competitive with the softening domestic offers. Many buyers are also wary of purchasing from overseas due to the credit crisis and lead times, issues which are major concerns in a volatile market such as this one.
Nonetheless, South Korea continues to be a very competitive and an aggressive import HSS supplier to the US West Coast. Most South Korean offerings have remained unchanged since our report two weeks ago, at $36.00 to $37.00 ($794 /mt to $816 /mt or $720 /nt to $740 /nt) duty-paid, FOB loaded truck in West Coast ports; however, the pricing trend appears to be softening as South Korean mills have been willing to offer discounts, in some cases, of up to $2.00 cwt. ($44 /mt or $40 /nt), depending on size and tonnage.
Meanwhile, Mexican and Turkish offers have also remained unchanged from two weeks ago but are trending slightly down. Mexican offers remain in the range of approximately $37.00 cwt. to $39.00 cwt. ($816 /mt to $860 /mt or $740 /nt to $780 /nt), delivered to Texas and California, and Turkish offers are available from approximately $35.00 cwt. to $36.00 cwt. ($772 /mt to $794 /mt or $700 /nt to $720 /nt) FOB loaded truck, US Gulf Coast ports. While Mexican and Turkish mills are also open to negotiate prices for certain orders, they may not be as flexible as their South Korean counterparts.
While keeping inventories as low as possible seems to be the priority for most service centers, preliminary license data from the US Import Administration demonstrate that total import structural pipe and tube tonnage arriving to the US in January 2009 was an estimated 69 percent greater than the total tonnage imported in December 2008, at 28,186 mt and 19,554 respectively.