With no attractive import offers in the market, and the hefty January scrap increases, US domestic hollow section mills are set to increase prices for the fourth time this year.
After a total of $7.00 cwt. ($154 /mt or $140 /nt) in increases in January 2008, domestic tubing mills are said to be raising prices again as early as Friday (or, if not, then by the beginning of next week). The price increase is said to be anywhere from $1.50 cwt. to $3.00 cwt. ($33 /mt to $66 /mt or $30 /nt to $60 /nt), but buyers are saying it will most likely be at least $3.00 cwt.
To recap, January alone saw three different increases totaling $7.00 cwt. ($154 /mt or $140 /nt). Announced in late November for January shipments, there was the first increase of the year totaling $2.00 cwt. ($44 /mt or $40 /nt), which was followed by additional increases of $2.00 cwt. ($44 /mt or $40 /nt) and $3.00 cwt. ($66 /mt or $60 /nt) later in the month.
Increases of this caliber are virtually unheard of; however, the market situation we are currently experiencing is unique. With no import offers at reasonable numbers, domestic mills can basically call the shots. The mills cite increased raw material costs as the main culprit behind all of these hefty increases; in February, however, busheling scrap prices did soften some and may follow that downward trend in March as well. If this happens, what will be behind the mills' reasoning for pushing tubing prices up again? Yet, in addition to the upcoming increase, more increases are likely with or without a valid reason.
Demand itself is not very strong, though service center inventories are low. Also most service centers are saying that January was an exceptional month. However, it is not that demand is necessarily picking up; it is more or less that the fabricators are hedging against the expected price increases to come and trying to buy at the lower levels.
Currently, including the three January increases previously announced, domestic hollow section prices 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" in the Midwest regions. Prices are $2.00 cwt. ($44 /mt or $40 /nt) higher for delivery to the West Coast. The domestic pricing trend is strongly up as the market awaits this upcoming increase.
West Coast mills, which mainly contribute to the tubing market with specialty sizes, are quoting their customers much higher numbers than their Midwest competitors. Also, with the lack of imports, they have become pretty busy. SteelOrbis has learned that two major West Coast mills are putting their customers on allocation.
The distressed square and rectangular tubing from China that did not meet the US specifications is still causing a headache. Service centers continue to talk and have said the resale price in the US is currently around $19.00 cwt. to $20.00 cwt. ($419 /mt to $441 /mt or $380 /nt to $400 /nt), loaded truck. There have also been reports that some of this material is being exported to certain hot Asian markets.
For new offers, China is completely out of the US hollow sections market and is not expected to return for a long while; however, in the meantime other countries are offering, but not at attractive numbers.
Some South Korean offers ranging from $44.00 cwt. to $45.00 cwt. ($970 /mt to $992 /mt or $880 /nt to $900 /nt) FOB West Coast ports have surfaced; however, there are not many takers as prices do not provide much savings compared to domestic numbers. Buyers are for now enjoying the benefits of buying domestic products over imports, one of which is a healthy cash flow.
As for the US Gulf import offers, flat rolled prices in Turkey are high, leaving Turkish tubing producers reluctant to offer to the US. Offers that are in the market are only about $1.00 cwt. ($22 /mt or $20 /nt) shy of the domestic price, i.e. $44.00 cwt. to $45.00 cwt. ($970 /mt to $992 /mt or $880 /nt to $900 /nt) FOB Gulf ports.