US domestic hollow structural section (HSS) prices have fallen another notch since SteelOrbis' last analysis two weeks ago, and prices are expected to continue trending on a decline through at least January.
The US scrap market is said to have hit bottom, and domestic flat rolled prices are likely very close to bottoming out as well; however, tubing numbers still have plenty of room to fall. Hot rolled coil prices have plummeted in recent months to the current levels of $27.00 cwt. to $30.00 cwt. ($595 /mt to $661 /mt or $540 /nt to $600 /nt), yet domestic tubing mills, for several months, had higher-priced flat rolled in stock, and therefore did not lower tubing prices as drastically as flat rolled prices fell. Now, demand for tubing is so weak and flat rolled prices are so low that substantial price decreases are expected every couple of weeks.
Transaction prices at mill level for HSS are now in the range of $54.00 cwt. to $55.00 cwt. ($1,191 /mt to $1,213 /mt or $1,080 /nt to $1,100 /nt) for A500 grade A and grade B hollow sections up to 6" ex-mill. Another price decrease is expected early this week and buyers expect this trend to continue through January.
As demand is so weak, mill transaction prices can easily be negotiated. For the right inquiry, if tonnage is significant, buyers say they can achieve numbers in the $40s cwt. from most Midwest mills. However, most buyers are not looking to buy right now. As the end of the year approaches, most service centers are in inventory-reduction mode, and demand is so soft that most buyers are not getting very much business, especially not the type of business to warrant a large-tonnage purchase.
Mills are having trouble filling their order books and are said to be stuck with excess material on their floors. In response to the difficult market conditions, North American tubing giant Atlas Tube sent a letter to customers Friday, November 21, stating that mill operations at its Blytheville, Arkansas facility will be temporarily shut down as of December 19, 2008. Atlas Tube stated that it will reevaluate demand levels in March to determine when the mill will reopen.
Going forward, things are looking grim, at least in the immediate future. Domestic tubing prices probably have a lot further to fall before bottoming out. Buyers expect prices to bottom out in the low-to-mid $40s cwt. and a rebound doesn't seem feasible until at least until the end of Q1. On the demand side, no up-tick is expected either, given the dismal economic conditions.
There is a lot of pressure on domestic mills to continue lowering their prices. Not only did scrap and flat rolled numbers plummet, but now import offers are beginning to pour in at very attractive numbers. Not many buyers are interested in making offshore purchases right now, but when the market eventually picks up, if these offers are still out there at lower numbers, they may interest some potential buyers.
China has lifted its fifteen percent export tax on HSS to encourage buying; however, most US buyers remember the nightmarish quality issues of last year and are afraid to go anywhere near Chinese material.
Turkey has been slashing its prices to encourage some buying activity, and although Turkish offers are significantly lower than US domestic numbers, there is not too much buying taking place, mainly due to the awful demand situation.
Turkish HSS offers to the US are now ranging from $42.00 cwt. to $43.00 cwt. ($926 /mt to $948 /mt or $840 /nt to $860 /nt) FOB loaded truck, US Gulf Coast ports.