Falling flat rolled prices and sluggish demand are both contributing to the weak hollow sections market in the US.
Slow sales activity in the flat rolled market has caused domestic prices to fall continuously in recent weeks with offers now at around $25.00 cwt. ($551 /mt or $500 /nt). Market players have commented that although the flat rolled market is supposed to pick up come Q4, for now, supply is outweighing demand. This and the fact that the tubing market itself is considerably slow have pushed the domestic pricing trend down.
The domestic hollow sections market is also struggling. Demand is not nearly as strong as it should be for this time of year, creating an excess of inventory. Some service center tubing inventories, although down when compared to previous years, are still high when considering the current demand, or lack thereof. This market situation has market players anticipating another price decrease in the near future. Domestic prices slipped on average $1.00 cwt. a few weeks ago, and while prices did not fall another notch this week, they have the potential to fall again in the weeks to come.
Current hollow section prices still range from $40.00 cwt. to $42.00 cwt. ($882 /mt to $926 /mt or $800 /nt to $840 /nt) for A500 grade A and grade B hollow sections up to 6" in the Midwest region.
The declining domestic market may have helped to push US tube producers to file an antidumping petition - a group of domestic pipe and tube producers (Allied Tube & Conduit; Atlas Tube; California Steel and Tube; Exl Tube; Hannibal Industries; Leavitt Tube; Maruichi American Corporation; Searing Industries; Southland Tube; Vest Inc.; Welded Tube; and Western Tube) filed an antidumping and countervailing duty petition June 27th against light-walled square and rectangular pipe and tube from four countries: China, Korea, Mexico, and Turkey. The investigation covers ornamental light wall square and rectangular tubing, including ERW ASTM A500 square and rectangular tubing and ERW ASTM A513 square and rectangular tubing. The size range for square items is from 3/8" x 3/8" up to 4" x 4" and the size range for rectangular items is from 3/8" x 5/8" up to 6" x 2". Wall thicknesses for the products included in the petition are less than 4 mm (0.156").
While the investigation is in progress, the US will see a significantly less amount of mechanical tubing arriving from the four countries mentioned above. This will have a large impact on the import market since these four countries are all major players. According to data from the US Import Administration, worldwide exports to the US for mechanical sized tubing totaled 60,180 mt in June 2007. Out of the 60,180 mt, 36,001 mt were exported from China, Mexico, Korea, and Turkey.
Light wall tubing offers from China will be eliminated for the most part, but structural sizes are still being offered to the US. The VAT rebate reduction has pushed the import pricing trend from China up as offering prices have increased by approximately $0.50 cwt. since our last report two weeks ago in anticipation of the VAT rebate effect. The full effect of the VAT rebate decrease has not yet been seen. The increase has been only modest so far due to falling flat rolled prices in China.
Current hollow section offering prices from China now range from $33.50 cwt. to $35.00 cwt. ($739 /mt to $772 /mt or $670 /nt to $700 /nt) FOB West Coast, approximately $0.50 cwt. ($11 /mt or $10 /nt) higher on the Gulf Coast. East Coast discharge is roughly another $0.50 cwt. ($11 /mt or $10 nt) higher than on the Gulf Coast.
Turkish offers to the US are still on the high side with little to no takers. The flat rolled market in this region is still soft, making raw material prices slightly lower; however, freight rates have increased, offsetting the lower priced flat rolled costs, keeping offering prices stable from our report of two weeks ago.
Import offers from Turkey are still in the range of $36.50 cwt. to $38.00 cwt. ($805 /mt to $838 /mt or $730 /nt to $760 /nt) FOB, loaded-truck, US Gulf Coast ports.