US flat rolled prices continued softening this past week; however, some distributors and traders are becoming more optimistic concerning the future of the market due to low inventories and a slight increase in inquiries.
Most competitive domestic spot offers for hot rolled coils (HRC) in the US market continue to range from approximately $25.00 cwt. to $27.00 cwt. ($551/mt to $595/mt or $500/nt to $540/nt) ex-Midwest mills, while the majority of US cold rolled coil (CRC) spot prices are mostly being offering at around $30.00 cwt. to $32.00 cwt. ($661/mt to $705/mt or $600/nt to $640/nt) ex-Midwest mills. However, most mills are currently on the offensive as they continue to push for December bookings, which is likely to result in further discounts as the domestic mills maintain their aggressive stance over the next few weeks. However, while December may be a wash, producers are demonstrating some optimism as regards January pricing; most US mill lead times are currently into mid-December but they are yet not willing to confirm January deals at discounted pricing. No producer has come out with January pricing yet and this is not expected to occur until mills fully book December.
While US flat rolled activity will likely continue to be weak through at least year-end, there is growing optimism that suspended projects requiring flat rolled steel will finally begin to get approved, along with a slow but steady improvement in the automotive industry, in early 2010, Even though flat rolled demand increases are not expected to be too significant by the end of the first quarter 2010, early speculation that scrap prices will increase in January due to tight supplies, along with the tight inventories throughout the flat rolled market, could lead to a modest increase in flat rolled pricing in late winter/early spring.
According to the latest data from the Metals Service Center Institute (MSCI), while monthly flat rolled inventory at US service centers increased from 2.76 million nt in August to 2.98 million nt in September, estimated months of inventory on hand remained under two at the end of September, at 1.9 months. According to comments made by Sheila Janin, ArcelorMittal USA's Director of Coated Products at the Association of Women in the Metal Industries' (AWMI) 2009 Annual Conference held this past week, this is the lowest level of carbon flat rolled steel inventories since the MSCI started tracking these figures in 1977. The common notion is that sooner or later, companies are going to need steel.
On the import side, activity remains quiet. Offshore sources' prices have remained stable for several weeks and most sources continue to demonstrate an unwillingness to engage in exporting to the US. Most foreign offers, aside from some Mexican HRC and some niche HDG products, are currently unable to compete with softening US domestic prices. Furthermore, even import offers that look attractive for first quarter deliveries are still too risky for most buyers to commit to. However, some import hedge buying could take place before the end of the year as import lead times start to extend into spring 2010.
The only price movement witnessed over the past week has come from Mexico, with HRC offers decreasing by approximately $1.00 cwt. ($22/mt or $20/nt) to a range of $24.00 cwt. to $26.00 cwt. ($529/mt to $573/mt or $4800/nt to $520/nt) delivered to the border crossing. Nevertheless, their tonnage is only available on a rather limited basis and only one Mexican flat rolled mill is currently active in offering to the US.
Meanwhile, not much has changed over the past week regarding import CRC offers. Offers from India and China are still hovering at around the very uncompetitive level of $34.00 cwt. ($750/mt or $680/nt) and higher, duty-paid, FOB loaded truck in US Gulf ports. While some traders think there is a possibility that Chinese import CRC offers may become more competitive in a month or two, it appears that Asian offers of both CRC and HDG have bottomed out in the meantime. Mexico's CRC offers remain the most competitive, at around $30.00 cwt. to $31.00 cwt. ($661/mt to $683/mt or $600/nt to $620/nt) delivered to the border crossing; the majority of booked deals recently are right in the middle of the range. Brazilian CRC offers remain also uncompetitive at a range of $34.00 cwt. to $36.00 cwt. ($750/mt to $794/mt or $680/nt to $720/nt) duty-paid, FOB loaded truck in US Gulf ports.