US domestic hollow sections prices soften

Plummeting flat rolled prices and the usual fourth quarter doldrums are finally taking their toll on domestic square and rectangular prices. After several months of holding firm, domestic producers are finally caving in. In October, domestic tubing prices fell approximately $2.00 cwt. ($44 /mt or $40 /nt) and now range from $45.00 cwt. to $46.00 cwt. ($992 /mt to $1,014 mt or $900 /nt to $920 /nt) for A500 grade A and grade B hollow sections up to 6". Larger and unusual sizes have large extras, some as high as double the base price. The steel market in general has been getting weaker this quarter, with prices for many products softening and demand slowing. Domestic flat rolled prices in particular are suffering because of the soft demand. It looks like the flat rolled market will remain weak for the next few months with the scrap market also trending downwards. Because of the lower raw material costs, domestic tube producers are finally procuring all their needs domestically without any restrictions, and are able to negotiate good discounts for their large buyers. Also, steel service center inventories are currently at an all-time high with the result that their purchases are low, as they are still trying to push their inventories out to avoid paying heavy taxes at the end of the year. Despite the current softness in the market, many are still optimistic about the tubing business in the new year, expecting the market to firm up in late Q1 2007. Market players say the tubing market is still strong, although it is not as busy as it was earlier in the year. Along with beams, structural tubing is one of the more solid and stable steel products at this time. On the import side, Chinese hollow sections offerings still range from $31.00 cwt. to $32.50 cwt. ($683 /mt to $717 /mt or $620 /nt to $650 /nt) FOB West and Gulf Coast. East coast discharge is approximately $0.50 cwt. ($11 /mt or $10 /nt) higher. For the West Coast, a lot of Chinese tube is imported by containers, which is faster and almost as inexpensive as break bulk shipments. Turkish prices on the other hand have decreased by $1.00 cwt., now ranging from $33.00 cwt. to $34.50 cwt. ($728 /mt to $761 /mt or $660 /nt to $690 /nt) for FOB, loaded truck, US Gulf Coast ports. Chinese prices are still lower, but the gap between Turkish and Chinese offers is beginning to close. The flat-rolled market has been softening in the Black Sea region, and Turkish tube makers have been taking advantage of the good deals in the international market, and in turn, lowering their tubing prices. However, the gap is still significant and there are almost no new Turkish shipments booked. Import buying activity remains soft as well, since service centers are not purchasing much at this time. However, buying activity is expected to pick up for late Q1, 2007 deliveries. Overall, there has been a decline in imports this past month. Census data from the United States Import Administration shows worldwide exports to the US have dropped from September to October. For the month of September, 62,761 mt of structural pipe and tube were exported to the US worldwide, compared to 40,967 mt for October 1st - October 24th. Mechanical tubing is showing the same trend with September numbers registering at 62,508 mt and worldwide export numbers to the US for October 1st - October 24th at 42.561 mt.