US flat rolled mills close December, hoping January prices will stick

While the US flat rolled market hit bottom just last week, it is already in an upswing, as Nucor Sheet Mill Group followed AK Steel this week, announcing January flat rolled price increases.

As previously mentioned by SteelOrbis, Nucor's announcement stipulated that January prices on all flat rolled products will increase by a minimum of $1.50 cwt. ($33/mt or $30/nt). This is a significant increase considering that many flat rolled buyers and distributors were watching prices soften just a few days prior. While the flat rolled increases will surely contribute to a sharp uptick in demand, it remains to be seen whether the bookings will be able to sustain through first quarter. Since this increase came just before the holidays, some buyers may be caught napping, while others may just not have the funds to book until January. For the many other companies who are in position to buy right now, they are likely to buy in large quantities, out of expectation that this will not be the only flat rolled price increase this winter.

However, moving forward many buyers are still questioning if the price uptick will last. Scrap prices are increasing and flat rolled inventory is extremely low; however, buyers are wary that the expected uptick in buying demand over the next couple months will be based solely on replenishing inventory and that once inventories are restocked, the demand will halt. This could lead to another price decline by the end of the first quarter. So, while buying activity is expected to increase significantly through January, longer term sustainability could be questioned. And most buyers have learned from last year, not to buy too much tonnage that they cannot sell, especially if prices soften again. In essence, there is not a lot of hedge buying going on anymore.

Currently, most domestic spot offers for hot rolled coils (HRC) in the US market continue to range from approximately $24.00 cwt. to $26.00 cwt. ($529/mt to $573/mt or $480/nt to $520/nt) ex-Midwest mills, while the majority of US cold rolled coil (CRC) spot prices are still mostly offered at around $29.00 cwt. to $31.00 cwt. ($639/mt to $683/mt or $580/nt to $620/nt) ex-Midwest mills. However, these December prices may not be available from all mills any longer, as most mills have closed their December books and are waiting until next week to open their January books. Furthermore, once January books do open, HRC and CRC spot prices are expected to begin climbing starting the first week of December, but how high and how fast remains to be seen. Most inventories are extremely low, especially as service centers have worked diligently to avoid any unnecessary taxes on excess inventory, so buyers will likely be forced to get product at pretty much the price mills ask for.

Meanwhile, the import markets for HRC and CRC have basically removed all offers to the US for the time being until they can more accurately assess US buyer demand and where US domestic prices are going. Currently, while most Mexican mills claim they are full through January, there may still be some possibility to book Mexican HRC at around $24.00 cwt. to $26.00 cwt. ($529/mt to $573/mt or $480/nt to $520/nt) delivered to the border crossing.

Regarding CRC imports, below are the previous week's offers, but as previously mentioned, there is currently a "wait and see" period for US importers before coming out with new pricing. Offers from India and China continue to be very uncompetitive at around $34.00 cwt. ($750/mt or $680/nt) and higher, duty-paid, FOB loaded truck in US Gulf ports. Additionally, Mexican mills are also offering some CRC to the US 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; however, like HRC, there is a significant limit on tonnage availability.