Rising flat rolled prices may continue to fuel US tubing hikes

Friday, 17 July 2009 21:47:53 (GMT+3)   |  
       

While the US tubing market continues to be plagued with excess inventory and weak demand, domestic mills managed to register huge price increases last month. As US flat rolled prices have continued to rise, US tubing mills may be leaning towards another price hike as well.

Just weeks after domestic mills increased hollow structural tubing (HSS) prices by $4.50 cwt. ($99 /mt or $90 /nt) in June, SteelOrbis has heard that domestic mills may increase prices again, by up to another $2.00 cwt. ($44 /mt or $40 /nt) or so for September orders. Providing further allowance for tubing mills to raise prices, Nucor recently announced another $3.00 cwt. ($66 /mt or $60 /nt) increase on all flat rolled products for September shipments.

While higher prices will be welcomed by most distributors, the low sales activity levels could begin to raise concern as to whether another, albeit smaller, price bubble is forming. Prices keep increasing on the heels of scrap and flat rolled hikes, yet demand has remained low and stable. If scrap prices decrease any time soon, which some distributors believe could happen over the next month, flat rolled, and hence, tubing prices may be forced to come back down a little, which could create issues for buyers stuck with higher-priced inventory again. That's the risk incurred when price increases are tied solely to a raw material, in this case flat rolled, and not demand.

Furthermore, many people and businesses have learned to be much more cautious over the past year. So, in an effort to make sure they don't get caught again with over-priced inventory, customers are still keeping inventories as light as possible, thus preventing any major resurgence in demand demand.

In the meantime, current domestic asking prices for HSS tubing are at approximately $34.00 cwt. to $35.50 cwt. ($750 /mt to $783 /mt or $680 /nt to $710 /nt) ex-mill, for ASTM A500 Grade A and B, up to 6". The majority of activity seen over the next couple weeks will mostly come from customers trying to fill some inventory holes at the lower end of this range just in case domestic mills hike offers again.

On the other side, one thing that remains consistent in today's tubing market is the lack of import interest or offers. Tubing import offers have remained quiet throughout most of the second quarter and into the third. Even Mexican offers, which had been the most consistent tubing import source to the US, have dried up in recent weeks. And the majority of offers that have been made in recent weeks are currently at or even higher than US domestic rates. Nonetheless, traders will still be keeping an eye on any attractive import offers that may surface for deliveries into 2010 -- if US domestic prices continue to rise.

Licensing data from the US Steel Import Monitoring and Analysis System (SIMA) demonstrate that total import tonnage of structural pipe and tube broke its streak of consecutive monthly decreases in June, with imports totaling 19,279 mt, compared to 18,075 mt in May. However, June imports are still less than half of the 46,996 mt they imported in June 2008. Canada and Mexico were the only major exporters of structural pipe and tube to the US in June, with 14,576 mt and 3,331 mt respectively. Mexican imports increased from 2,915 mt in May, while Canadian imports increased from 11,884 in May.


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