US domestic hollow structural section (HSS) prices tumbled in December amidst the economic crisis and weak consumer demand.
Since SteelOrbis' last tubing analysis three weeks ago, official transaction prices at the mill level for HSS have fallen by approximately $12.00 cwt. ($265 /mt or $240 /nt). While prices are not expected to continue decreasing as drastically as they did in December, further price declines could be seen in January, as buyer demand is expected to remain weak for at least the first half of 2009.
Official HSS prices are currently in the approximate range of $39.00 cwt. to $41.00 cwt. ($860 /mt to $904 /mt or $780 /nt to $820 /nt) for A500 grade A and grade B hollow sections up to 6" ex-mill in the Midwest. However, buyers may be able to negotiate deals below this range if they able to present significant tonnage, as weak demand coupled with low feedstock prices have enabled tube producers to be more flexible with their prices.
Tubing prices were not expected to drop to this price range until the end of January but the US' leading HSS manufacturer, Atlas Tube, was forced to lower their prices earlier than anticipated in December, due to a significant decline in orders and demand. Moving forward, most buyers still expect HSS prices to register another decrease, albeit a more modest one, before the end of January.
Furthermore, while the ongoing production cutbacks in the flat rolled market could help begin to stabilize the HSS tubing market's supply and demand balance, the narrow price gap of approximately $15.00 cwt ($331 /mt or $300 /nt) between current domestic hot rolled coil and domestic HSS tubing prices indicates that it could be a while before the tubing market will recover. One tubing trader told SteelOrbis that he does not expect consumer demand to improve to a level necessary to support a market rebound until about another five months.
Import tubing offering prices to the US have also declined over the past three weeks, although not as sharply as their domestic counterparts; however, many traders believe that because of the high risks associated with buying imports in a weak market, import prices will continue to decline over the next month or longer regardless of what happens with domestic prices.
Most import HSS tubing offers from Mexico declined by approximately $2.00 ($44 /mt or $40 /nt) since our last report and are now slightly less than domestic offers, ranging from about $37.00 cwt. to $39.00 cwt. ($816 /mt to $860 /mt or $740 /nt to $780 /nt) delivered to Texas and California.
Meanwhile, Turkey continues to offer the most aggressive rates to the US. After reducing its offering prices by approximately $2.00 cwt. ($44 /mt or $40 /nt) in recent weeks, Turkish imports to the US are now offered at around $33 .00 cwt. to $34.00 cwt. ($728 /mt to $750 /mt or $660 /nt to $680 /nt) FOB loaded truck, US Gulf Coast ports.
As for the West Coast, while scattered South Korean offers are still seen, the other potential import source, China, lifted its fifteen percent export tax on HSS in December to encourage exports. However, most US buyers had bad experiences with Chinese tubing in 2007 due to quality problems. Therefore, Chinese mills are currently not a factor in the US market.
Data from the US Import Administration demonstrate a steady decline in the amount of structural pipe and tube tonnage arriving in the US since September 2008. Worldwide imports to the US totaled 43,291 mt in September, 30,498 mt in October, 25,169 mt in November, and 20,024 mt in December (Based on Census and License Data from the US Department of Commerce).