Over the past few months US tubing mills have followed the lead of domestic flat rolled mills, dramatically increasing prices by nearly $8.00 cwt. ($176 /mt or $160 /nt) since the beginning of June. However, after flat rolled mills' latest price move, US tubing mills have been carefully mulling over their next move.
After two significant price increases announced within the last month, US flat rolled mills have raised hot rolled coil prices by as much as $4.50 cwt. ($99 /mt or $90 /nt) within the last month alone. And even though the US flat rolled market has been experiencing a far greater demand than tubing producers have seen, many distributors expect domestic tubing mills to try and ride the flat rolled market's momentum, matching the $4.50 cwt. ($99 /mt or $90 /nt) increase for October shipments, albeit more gradually.
While domestic tubing mills will want to take advantage of the current momentum and growing optimism on the flat rolled side, tubing demand remains low and the slow holiday season is approaching, which could lead to even less demand. Even with the continuing price escalation of HRC, tubing mills can ill afford to get too greedy heading into the fourth quarter, only to be forced to lower prices again before 2010.
This is the primary reason why domestic mills are expected to increase prices for October shipments over two installments. An approximate $2.00 cwt. ($44 /mt or $40 /nt) increase is expected to be announced over the next week, and depending how the market digests it, another $2.00 cwt. ($44 /mt or $40 /nt) increase could occur sometime in the middle-to-end of September. Furthermore, while it may not necessarily be the best time to increase prices when demand is weak and the end of the fourth quarter is looming, domestic mills have learned over the past year that lowering prices will not increase demand, and that there is really no import threat.
For now, current domestic listed prices for hollow structural section (HSS) tubing continue to range from approximately $37.00 cwt. to $38.50 cwt. ($816 /mt to $849 /mt or $740 /nt to $770 /nt) ex-mill, for ASTM A500 Grade A and B, up to 6." However, distributors and local traders indicate that there are still opportunities to negotiate discounts on spot offers, for as low as the in the low $30s cwt., depending on tonnage and size specifics.
On the bright side, the domestic tubing market remains mostly insulated from imports. Traders have informed SteelOrbis that even if there was more demand for HSS tubing, import offers would have to be low enough to compete with domestic offers in the low $30's Cwt., which would-be import buyers are able to achieve by pooling their orders and presenting to the domestic mills. . And there just aren't any import offers low enough to compete with the good deals buyers can still get from the domestics,, not even from the only active source, Mexico. Mexican imports would not have to be as low as their offshore competition, and while Mexican mills may be able to provide quick deliveries, there just isn't enough of a price benefit to warrant buying anywhere outside the US. Mexican hot rolled coil prices, too, are on a speedy rise.
Preliminary license data from the US Steel Import Monitoring and Analysis System (SIMA) demonstrate that total import tonnage of structural pipe and tube has decreased from about 18,680 mt in July to 13,665 in August. Monthly structural pipe and tube imports had been hovering within 18,000 mt since March. While most sources remained relatively unchanged in their volumes from July to August, imports from Mexico dropped from 3,616 mt in July to a negligible amount in August, while Canadian imports dropped more significantly from 13,271 in July to 9,413 in August.