As predicted in our report of two weeks ago, US hollow structural producers have upped their transaction prices, backed by the increased flat rolled prices. However, the increase is considered to be strictly cost-driven since demand is not substantially strong.
Spring has arrived and is bolstering the construction markets, though the warmer weather just doesn't seem to be enough to kick the tubing demand into high gear. Large building projects are in the works, but tube mills are not booked to capacity. However, when comparing demand for structural tubing used in these larger projects with ornamental-sized square and rectangular tubing, the market seems to shine; ornamental sizes are very sluggish as the housing construction market continues to slump.
Service centers are keeping inventories at a moderate level, not wanting to overbuy in a "just okay" type of market.
Still, despite the slight lack in demand, tubing producers have upped prices by $40 /nt ($2.00 cwt. or $44 /mt) as of last week. This price increase has been generally accepted in the market. Even though the scrap prices have softened some recently, domestic hot rolled coil prices still have a slight upward trend, forcing tubing producers to stick to their price increases as well.
Domestic hollow section prices are now in the range of $41.00 cwt. to $44.00 cwt. ($904 /mt to $970 /mt or $820 /nt to $880 /nt) for A500 grade A and grade B hollow sections up to 6" in the Midwest region.
On the import side, prices from both China and Turkey are at the same levels that SteelOrbis last reported two weeks ago. Turkish offers are still on the high side, and US traders are not achieving many bookings, except for rare import destinations like East Coast and Great Lakes. Turkish hollow section offers are ranging from $37.00 cwt. to $38.50 cwt. ($816 /mt to $849 /mt or $740 /nt to $770 /nt) for FOB, loaded truck, US Gulf Coast ports. Flat rolled prices seem to have stabilized in Turkey, and hollow section prices can be expected to remain at this level for the next couple of weeks.
Regarding the biggest import factor in the US, now that the Chinese VAT rebate reductions have been announced, traders can finally take a breath and continue to do business as usual with Chinese mills. Announced this week, the value-added tax (VAT) rebate for tubing will not decrease as some had suspected, and will remain at 13 percent. This news will keep Chinese hollow section offerings at a neutral level, as Chinese mills won't have to up prices in fear of losing the rebate.
Chinese offers are significantly lower than domestic prices right now for shipments arriving in Q3, with prices ranging from $32.50 cwt. to $34.00 cwt. ($717 /mt to $750 /mt or $650 /nt to $680 /nt) FOB West Coast, approximately $0.50 cwt. (11 /mt or $10 /nt) higher on the Gulf Coast. East Coast discharge is approximately another $0.50 cwt. ($11 /mt or $10 nt) higher than the Gulf Coast.
License data from the United States Import Administration for structural pipe and tube show that in March 2007, worldwide exports to the US totaled 57,640 mt. The top three exporters to the US were: Canada at 23,256 mt, China at 16,497 mt, and Korea at 5,580 mt. For mechanical tubing, worldwide exports to the US totaled 56,447 mt, with the top three exporters to the US being: Mexico at 16,109 mt, China at 11,702 mt, and Canada at 7,591 mt.