Despite raw material price increases and the badly wounded import competition, weak demand has caused US hollow section producers' attempted price increase to fail.
Service centers are not predicting a booming 2008 for tubing products, at least not in the first quarter. Despite the expected flat rolled increases to come, tubing prices may not follow this trend as demand seems to have worsened and is not expected to get much better. The housing market is sluggish, and there are no signs of recovery in the near future. With contractors not building as many homes, the tubing market suffers as larger non-residential projects such as schools and shopping centers are no longer needed to finish community plans. Although the non-residential and industrial construction markets have been maintaining some strength, the expectations for the months to come are relatively weak.
Unless supply tightens up and demand strengthens, even if flat rolled prices do continue to rise a little, the tubing market will not accept any price increases. In fact, just recently, US tubing producers attempted to raise tubing prices by $1.50 cwt. ($33 /mt or $30 /nt), and the increase was initially expected to go through. After all, the US' largest import source, China, is battling with quality claims, and there are not many Chinese import arrivals in the pipeline for the coming months. In the end, however, the tubing price increase was retracted due to slow market conditions. Demand has not improved enough to warrant a price increase, and there is too much capacity in the market.
Still, inventories are on the low side, and service centers are trying to keep them low for now until the market conditions improve. On a positive note, if demand begins to strengthen in the coming months, these low inventories could really boost the overall market conditions, as buyers will be ready to replenish their stock to keep up with demand.
As for now, US domestic tubing prices are back to a range of $38.00 cwt. to $39.00 cwt. ($838 /mt to $860 /mt or $760 /nt to $780 /nt) for A500 grade A and grade B hollow sections up to 6" in the Midwest regions. The domestic pricing trend is now neutral.
There are very few tubing imports arriving in the US, and there are not many offers out there for first quarter arrivals. Since the market is soft, there is not much buying activity for either domestics or imports.
There are still concerns about Chinese tubing quality, but Chinese offers are still available in the market. They are priced very close to the domestic offers, however, as raw material costs in China are on the high side. New offering prices are ranging from $36.00 cwt. to $37.00 cwt. ($794 /mt to $816 /mt or $720 /nt to $740 /nt) FOB West Coast and are 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.
Many claims are waiting to be resolved. Typically, Chinese mills' favorite way of settling claims is to continue shipments and compensate traders for their losses later. However, traders are now extremely nervous about reordering from China. Also, some buyers refuse flat out to buy Chinese materials, which is another major obstacle for new sales.
In the meantime, the market is saturated with distressed and secondary tubes waiting to be disposed of. Some secondary dealers are bidding for distressed cargoes at numbers lower than scrap prices.
New Turkish offers are not finding many takers either, as Turkish import prices are very close to the domestic price. Freight rates to the US from Turkey are now estimated at $110 /mt for small quantities of products, up approximately $30 /mt from a few months ago. Turkish offers to the US are ranging from $38.00 cwt. to $39.50 cwt. ($838 /mt to $871 /mt or $760 /nt to $790 /nt) FOB, loaded-truck, US Gulf Coast ports.