US tubing market – Prices remain stable for now

The pricing trend for domestic structural tubing is stable for the time being, however market players believe pressure from imports may force domestic producers to lower prices before the end of 2006. After an approximately $2.00 cwt. ($44 /mt or $40 /nt) decrease in domestic tubing prices last month, the pricing trend appears to be stable now. Current domestic tubing 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”. Larger and unusual sizes have large extras, some as high as double the base price. Structural tubing, although it is one of the stronger steel products this quarter, is starting to show some signs of weakness. Demand for tubing is slowing as it is for most steel products this quarter. The residential construction sector is continually sluggish and we are beginning to experience a winter slowdown. Still, the non-residential construction sector appears to be holding up, which is a good indicator of demand for hollow structurals. On the other hand, service centers, with inventories currently at an all-time high, are trying to liquidate their products, though buying activity is minimal. Imports are readily available, but sales are slow. Prices for both Chinese and Turkish square and rectangular tubing have remained the same since our last report, however, with the current state of the US steel market and the worldwide softening of flat-rolled products, the pricing trend is now slightly down. New quotations are now for March and April arrivals, and since this is usually the busiest time of the year, import buying activity should start very soon. Chinese hollow sections offerings still range from $31.00 cwt. to $32.50 cwt. ($683 /mt to $717 /mt or $620 /nt to $650 /nt) FOB West and Gulf Coast. East coast discharge is approximately $0.50 cwt. ($11 /mt or $10 /nt) higher. Turkish prices are still ranging from $33.00 cwt. to $34.50 cwt. ($728 /mt to $761 /mt or $660 /nt to $690 /nt) for FOB, loaded truck, US Gulf Coast ports. There is a significant price gap between domestics and imports. Some imports are coming in at more than $10 cwt. ($220 /mt or $200 /nt) cheaper than the domestic pricing. So far, the decent demand has allowed the big gap between the domestic and import pricing. However, if the demand softens further, eventually domestic tube makers will have to adjust their pricing downward in order to capture some of the market share. If this becomes necessary, tube makers will at least have some break from high domestic flat rolled prices, as the flat rolled market has softened significantly, and good deals are certainly out there for large tonnage buyers, such as tube makers. It does not appear that the soft flat rolled market will pick up until at least the middle of Q1 2007.