Steel Products Prices North America

The Sky is NOT Falling... (at least not yet)

June 2, 2016

Late this afternoon one of our readers forwarded to us an article from one of the other steel periodicals referencing foreign steel prices as “falling fast.” Steel Market Update’s perspective (and those from our steel trading sources) is different than what another periodical may be reporting. We believe that one must look at the bigger picture before we tell the market that the sky is falling. We spoke with a number of trading companies after 5 PM this afternoon in order to get the most up to date information possible.

When evaluating the market and especially foreign steel import market pricing, Steel Market Update (SMU) is careful to throw out the outliers. Outliers are those foreign steel mills or trading companies that have a small amount of steel to sell, quality is suspect or are testing the market. As one trading executive put it to us this afternoon, “It is much more important what US Steel does with Granite City than worrying about a few import tons.”

SMU confirmed there are hot rolled offers out there, mostly from second tier sources or mills with suspect quality, around $540 per ton into the port of Houston. However, we are being told by legitimate traders that most offers are on hot rolled into the port of Houston are running $550-$570 per ton ($27.50/cwt-$28.50/cwt). One of the traders confirmed to us (and we printed this last week) that they have taken their HRC prices down to $28.00/cwt from $29.50/cwt. The question that we are asking is, are the offers dropping because buying has slowed and the need for HR has dropped or because the market is awash in cheap steel?

We spoke with one of the Turkish traders this evening who confirmed that they were selling hot rolled at $27.50/cwt-$28.00/cwt and saw no need to go below those price levels. Even so, they were only booking 15,000 to 20,000 tons for July shipment. We were told that any offers below the $27.50/cwt level ($550 per ton) would be rejected as they can sell it in their home market.

When asked about the Serbian, Egyptian and other offers being bantered about in the marketplace this Turkish trader told us, “People have got to realize that these offers are not being supported.” He told us of one trading company that had taken 5-7,000 tons of Egyptian HR orders only to have to return them to buyers as the mill would not confirm the orders. A price is only a good price if the steel gets delivered. He told us, “The market is full of noise” and what people were hearing “was not a complete reality.”

The spread between domestic hot rolled prices to that of cold rolled and galvanized suggests that the domestic HRC market is much weaker than that of cold rolled and coated steels. This is not something new, we and many others have been reporting on the weakness associated with the energy and agricultural markets both big users of hot rolled steel.

SMU does not yet see the U.S. market as being awash in offers for cheap foreign steel. One of the main reasons being the antidumping and countervailing (AD/CVD) suits which are blocking imports from a number of countries, most importantly being China (cold rolled and coated, China was already blocked from selling hot rolled).

Cold rolled offers out of Vietnam and Turkey, which we are being told are some of the lowest if not the lowest out there, are running around $670 per ton ($33.50/cwt). These prices are slightly lower than what was being quoted a few weeks back.

Earlier this week we spoke with a buyer who just returned from Vietnam. One of the very first comments made to SMU by the buyer was, “I don’t see how they [Vietnam] will fill the void.” The buyer went on to say that the Southeast Asia market was very busy as both Vietnam and Malaysia were experiencing solid growth. The Vietnamese mills are still learning the business of selling steel to the United States. Of course with the U.S. having the highest prices in the world it is normal to expect them to try to sell into the U.S. market. We were warned, however, that not all Vietnamese mills are made equal and that the buyer be aware of who they are doing business with…

The article forwarded to SMU referenced .012 G30 galvanized prices as now being offered at $33.00/cwt-$35.00/cwt which on the surface makes absolutely no sense. Why would any country/mill sell steel with zinc on the surface at the same price as cold rolled (no zinc)?

We spoke with one trader who is very active in the light gauge galvanized market who told us, “Not much has changed on the light gauge front since Jindal was eliminated as a supplier by the trade suits. Ditto for Arvedi. Current offers for 0.012” are in the $42 – $44 range [$840-$880 per ton]. Turkish prices are a bit higher (though more competitive in the >26 gauge range). UAE (AGIS) is on the sideline and Ispat Asean is not competitive (at Turkish levels in the high $40’s). Pakistan is more aggressive and is the only sub $40 option that I am aware of.”

Another company handling light gauge galvanized told us, “0.012 G30 is well above $800 from traders so not sure what they are talking about.”

Can you buy foreign steel at prices lower than domestic base prices? Yes. Is the volume such that lead times will begin to shrink and we will be back to importing 4 million tons a month of foreign steel? No.

And who is to say that putting your eggs in Vietnam’s basket is a wise business move? Do the domestic mills have the ability to shut Vietnam out of the cold rolled and coated markets? So far it appears the US Department of Commerce and the political winds have the mills’ backs…

Just something to think about when you are out speaking to your steel mill and trading partners tomorrow.