Up until this past week, the US domestic hollow structural section (HSS) market had valiantly warded off any official price decreases in 2009, after undergoing double digit per-hundred-weight price decreases in November and December; however, the lack of demand has proven to be just too much for the tubing market to withstand.
As a result, official domestic HSS prices at the mill level decreased by about $2.50 cwt. ($55 /mt or $50 /nt) since our report two weeks ago and can now be found in the approximate range of $36.50 cwt. to $37.50 cwt. ($805 /mt to $827 /mt or $730 /nt to $750 /nt) for A500 grade A and grade B hollow sections up to 6" ex-mill in the Midwest. Even with this new established price, the trend is expected to remain soft and mills may be willing to negotiate below this range for certain orders, depending on size and tonnage.
Some good news for the pipe and tubing markets is that service center inventory levels and shipment activity both increased from December to January; however, January 2009 inventory and activity levels were still well below year-over-year comparisons. According to the Metal Service Center Institute (MSCI) monthly shipment and inventory report, daily shipments of service center pipe and tubing inventories increased from 8,100 nt in December to 9,300 nt in January 2009, but January 2008 daily shipments were at about 15,000 nt. Also, the length of time it would take service centers to deplete their warehouse pipe and tubing inventory based on shipment levels decreased from 4.0 months in December to only about 3.7 months in January - then again, this was still over a full month longer than the estimated 2.6 months of inventory overhang in January 2008, and January 2008 inventory levels were also over 100,000 nt greater than January 2009 levels.
Moving forward, there is no set timetable as for when demand will improve back to profitable levels. In the meantime, most service centers are just trying to keep their inventories low and are only purchasing quantities that they know they can move quickly.
On the import side, most foreign mills who had found it difficult to compete with domestic offers over the past couple of months are now finding it almost impossible, given the most recent domestic price range and lead times.
After being the most aggressive tubing exporter to the US over the early part of 2009, South Korea now appears to be offering in a price range similar to Mexico's, of about $37.00 cwt. to $38.00 cwt. ($816 /mt to $838 /mt or $740 /nt to $760 /nt). Korean offers are duty-paid, FOB loaded truck in West Coast ports, while Mexican offers are delivered to Texas and California. The growing strength of the US dollar over the Mexican peso should make Mexican imports more attractive, although most US tubing demand (which there is very little of to begin with) is being fulfilled domestically.
Meanwhile, Turkish tubing offers also appear to have backed off from the US import market in the past couple of weeks. Some traders have said that Turkish tubing offers really don't exist right now, as there is hardly any customer interest with current lead times beginning in May. Furthermore, even if you can book an order, there are virtually no vessels available to ship the product unless there is large enough tonnage. With that being said, of the few that are out there, most Turkish offerings remain unchanged since our last report two weeks ago, in the range of 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.
Preliminary license data from the US Import Administration demonstrate that total import structural pipe and tube tonnage arriving to the US increased by approximately 69 percent in January 2009 from December 2008, at 28,186 mt and 19,554 mt respectively; however, recent license data indicate that import tonnage to the US then decreased an estimated 38 percent from January's tonnage to February's 17,490 mt of import tonnage. Canada, Mexico and South Korea were the top three structural pipe and tube tonnage importers to the US in February, with 10,671 mt, 2,971 mt and 2,135 mt respectively. China also brought in an estimated 787 mt of imported tonnage to the US.