As SteelOrbis predicted in our bi-weekly tubing analysis two weeks ago, US domestic tubing mills have, in fact, upped their prices, mainly due to rising raw material costs.
US domestic hollow structural section (HSS) mills have raised their tubing prices $40 /nt ($2.00 cwt. or $44 /mt) effective for orders as of November 30, 2007. Orders placed before November 30th are price-protected as long as they make it in time for December deliveries. As of January 1, 2008, all shipments, no matter when the order was placed, will be charged the higher price.
Domestic hollow section prices now range from $40.00 cwt. to $41.00 cwt. ($882 /mt to $904 /mt or $800 /nt to $820 /nt) for A500 grade A and grade B hollow sections up to 6" in the Midwest regions.
There are two major factors that contributed to this increase: rising raw material costs and a lack of imports. To start, scrap prices are now beginning to climb up as the end of the year approaches. Sources are also stating that this is not a one-time increase and that the first quarter is supposed to be a strong one for scrap. Prices are expected to increase again in January. Even more crucial are the increasing flat rolled prices. Although the flat rolled market hasn't necessarily tightened up just yet, the announced price increases have been mostly accepted in the market, as producers have been sticking to their guns. The other factor helping tubing mills to increase prices is the lack of imports. China, a once-major import source, is no longer a threat to the US tubing market. Other offshore sources do not have competitive prices at the moment either, so US buyers are mainly dealing with domestic material.
Demand has not necessarily improved, but it is stable. If demand were weakening, then it would be quite possible that this newly announced tubing increase would not be accepted. However, with a steady demand, rising raw material costs and next to no import competition, mills have taken this opportunity and will more likely than not be successful in having the increase stick. An East Coast buyer commented, "I am already seeing the increase built in. Flat rolled producers are sticking to their increases, so if the full increase does not stick for tubing, at least $30 /nt will."
Now that domestic tubing mills have officially announced this increase, chatter is already surfacing about the next one. SteelOrbis has heard that another hollow sections increase is due for February of next year. With the expectations that raw material costs are to climb even further, it has been said that mills are planning to execute another price increase at the same capacity if not larger than this most recent price hike, which pushes the domestic pricing trend slightly up.
Even though China is no longer importing hollow sections to the US, the domestic market still needs to watch out for the world's largest steel producer. Secondary material from the Chinese quality claims is still on the ground in the US, and potential buyers are trying to bid at numbers as low as $12 cwt. to $15 cwt. ($265 /mt to $331 /mt or $240 /nt to $300 /nt). Some of these downgraded Chinese tubes are still finding their way into the prime market and suppressing the spot prices.
With China out of the market, traders have been trying to develop new sources for hollow sections. Currently, talks are emerging between traders and Taiwan and Malaysia, although prices are not competitive compared to domestic numbers, not even with the newly announced increase. As 2008 progresses, and if the domestic mills up their prices come February, we may see these countries importing more material.
One import source that is still offering to the US is Turkey. With numbers in the same range as domestic numbers, there have been little to no bookings. Offers from Turkey have gone up approximately $1.00 cwt. since our last report two weeks ago due to the rising freight costs, but are now expected to remain stable for a little while. But no softening is forecasted for these prices either; flat rolled prices in Turkey are strongly on the rise again.
Turkish offers are in the range of $39.00 cwt. to $40.50 cwt. ($860 /mt to $893 /mt or $780 /nt to $810 /nt) FOB, loaded-truck, US Gulf Coast ports for March arrivals.
Data from the US Import Administration show for structural pipe and tube, worldwide exports to the US during the three-month span of September, October, and November 2007 totaled 129,856 mt. During the same three-month span in 2006, tonnage totaled 191,590 mt, a difference of 61,734 mt. The same pattern is shown for mechanical tubing. For the same three-month span in 2007, worldwide mechanical tubing exports to the US totaled 141,271 mt, while in 2006 tonnage equaled 194,564 mt.