US domestic flats market sees no end in sight for price increases

Spot prices in the US domestic flats market are up approximately $2.00 cwt. ($44/mt or $40/nt) since our last report a week ago as mills continue to raise prices in anticipation of the next scrap increase announcement.

Prices have moved up quickly in the first week of 2011 as Severstal NA, Duferco Farrell, Sharon Coating, and NLMK Indiana followed Nucor's December 28-announced $30/nt price increase on all flat rolled products, while US Steel, which matched Nucor's hike on hot rolled coil (HRC), has increased its cold rolled coil (CRC) base price by $40/nt. Then, on Thursday, January 6, AK Steel raised its base price on all flat-rolled products by $2.50 cwt. ($55/mt or $50/nt), and Nucor rolled out an additional $3.00 cwt. ($66/mt or $60/nt) increase on flat-rolled products, both effective immediately. The newest increases put mill asking prices for HRC and CRC at approximately $37.00-$40.00 cwt. ($816-$882/mt or $740-$800/nt) and $42.00-$45.00 cwt. ($926-$992/mt or $840-$900/nt), respectively, depending on the mill, with Nucor on the high end. And with a possible $65-$75/lt increase in busheling prices expected by next week, other mills will likely follow Nucor in announcing another increase in the coming days.

At the beginning of this week, HRC spot prices had moved up $1.00 cwt. ($22/mt or $20/nt) over last week's previously reported ranges, with a few deals just under $35.00 cwt. ($772/mt or $700/nt) still available for buyers with "just the right order." However by week's end, spot prices were up to $35.00-$37.00 cwt. ($772-$816/mt or $700-$740/nt) ex-Midwest mill, a $2.00 cwt. increase on the high end over last week's average spot prices.

As with HRC, CRC spot prices also moved up rather quickly this past week. Spot prices were approximately $40.00-$41.00 cwt. ($882-$904/mt or $800-$820/nt) earlier in the week, up $1.00 cwt. on the low end since just before the New Year holiday, however the most commonly reported spot ranges are now up to $40.00-$42.00 cwt. ($882-$926/mt or $800-$840/nt) ex-Midwest mill, with the majority of orders being booked toward the higher end of the range.

With additional increases imminent, and HRC spot prices expected to hit $40.00 cwt. (and CRC to hit $45.00 cwt.) by mid-to-late Q1, it looks as though ArcelorMittal USA, which informed customers about two weeks ago that it would be holding its HRC and CRC base prices at $35.00 cwt. and $41.00 cwt., respectively, through March deliveries, is now beginning to inform them otherwise, and will also be raising its offer prices in the coming weeks. "It's not surprising" one West Coast distributor told SteelOrbis. "Everyone thinks prices are going to continue to go up. If HRC spot prices hit $40.00 cwt. their (ArcelorMittal) prices will be $100/nt below everyone else's. There's no way they'd ever let that happen."

Like spot prices themselves, predictions of how long the flats market can sustain higher prices are increasing as well. With lead times from a number of mills now into March entirely, firmer prices may very well sustain on deliveries beyond the first quarter.

Looking to imports, as with past weeks, Mexican mills remain active in the US HRC market, and with a freight advantage in Gulf ports, Houston in particular, mills south of the border continue to match US prices and keep market share. Offshore, Russian offers of HRC have increased approximately $4.00 cwt. ($88/mt or $80/nt) over the last two weeks to $36.00-$38.00 cwt. ($794-$838/mt or $720-$760/nt) duty-paid FOB loaded truck in US Gulf ports, an increase that has not diminished US interest in Russian product; according to one East Coast trader, "they're still booking quite a few tons."

**Duty-paid FOB loaded truck in US Gulf ports