US flat steel markets were mostly steady this week as reports of higher pricing for August scrap could be preventing further declines in flat steel pricing, market insiders told SteelOrbis this week. And while demand for flat steel products remains low, even as the US economy continues to struggle, flat steel prices could be poised for a rebound, they say, fueled by low inventories at scrap yards in the US Midwest and Northeast.
“I think we’re pretty close to the bottom for prices,” said one Gulf Coast flat steel insider. “It’s just a question as to when the mills will make a move to increase prices, but based in what we’re seeing, we expect a price increase within the next 2-4 weeks.”
This week’s flat steel assessments differ from the week of July 15, when flat steel prices continued down mostly on scant mid-July demand for finished steel products and an August scrap forecast that was more vague at strong sideways to higher. Late this week August scrap is discussed strong sideways to $20/gt delivered to mill higher across all grades, with prime grade scrap most likely to see expected increases, market insiders said. Scrap inventories are reported down 20-30 percent in the US Northeast and as much as 50 percent below normal levels in the US Midwest.
With scrap expected to rise, market insiders predicted last week that a price bottom was near as flat steel pricing on the US Gulf Coast was approaching mills’ variable cost of doing business (expenses that change based on how much a company produces and sells). They also expected a moderate price increase from mills over the next several weeks.
“Higher scrap prices should put a floor under hot-rolled coil (pricing),” another steel market insider told SteelOrbis. “And as scrap prices rise, margins should improve for the mills.”
He continued, “We are coming back within the range of where we used to be,” he said. “Margins were so wide that an increase in scrap (would) not show an increase in sheet. Right now, I don’t think that (the mills) are hurting, but I don’t think that they’re very happy.”
On the spot market pricing front, domestic HRC prices are reported stable at $32.50-$33.00/cwt. FOB mill ($650-660/nt or $717-728/mt), while lead times for delivery of spot HRC were unchanged at 3-4 weeks, indicating markets are well supplied and mill inventories adequate heading into the last full week of July, market insiders said.
“With lead times for HRC at 3-4 weeks, mills don’t have a lot of leverage on pricing,” another market insider said. “Also inventories at service centers are about 3 months (HRC) supply on hand, so that doesn't bode well for pricing.”
Pipe traders polled by SteelOrbis reported hearing some unconfirmed offers for spot HRC at $31.00-32.00/cwt. ($620-640/nt FOB mill), while one low-ball offer was mentioned but unconfirmed as low as $29/cwt. ($580/nt FOB mill).
In other flat steel grades, CRC is assessed slightly less at $47.00-47.25/cwt. ($940-956/nt or $1,036-1,042/mt) FOB mill, versus the previous range at $47.00-$48.00/cwt. ($940-960/nt or $1,036-1,058/mt). In coated products, HDG is discussed in light trade at $43.00-$43.50/cwt. ($940-945/nt or $948-959/mt), FOB mill versus the prior week’s $43.25-43.50/cwt. ($865-870/nt or $954-959/mt) range. Lead times for CRC and HDG are reported a bit tighter than reported perviously at about 6 weeks.
Market analysts still contend the price of CRC in weekly spot markets could continue to be under significant pressure as the historic spread to HRC remains too high.
SteelOrbis data shows the current price spread between HRC and CRC is $288/nt or $14.38/cwt. off from $315/nt or $15.75/cwt. ($347/mt) the week of July 15. Analysts interviewed by SteelOrbis predict the spread will decline to between $200-$250/nt ($221-276/mt) over the next several months.