February Flat-Rolled Imports Highest in a Year; Start of a Trend?

And the trend is only just getting started, according to some market participants.

The U.S. was licensed to import 692,904.05 metric tonnes of flat-rolled steel in February, according to license data from the U.S. Commerce Department. That’s up 27.2% from a preliminary figure of 544,766.49 tonnes in January and marks the highest point for flat-rolled steel imports since 758,550.54 tonnes in January 2020, before the COVID-19 pandemic outbreak hit North America in full force.

“A lot of end users are now ready to accept foreign product and are specifically asking us to place orders for them. If we are not there now, we will be shortly. Domestic mills have pushed it too far,” one respondent to a recent Steel Market Update survey said.

“Import prices have been attractive for a while, but the downside risk scared many. Now downside risk has been pushed out in some customers’ minds–so imports are still attractive to some,” a second survey respondent said, noting that manufacturers in particular were increasingly looking toward the import market.

One reason why the downside risk is limited: Extended lead times at U.S. mills and in some cases an apparent inability on the part of domestic producers to supply customer demand. “It has been a struggle to get extra material in order to cover sales that have significantly exceeded our forecasts. Worst I have seen since 2004 when it comes to availability,” a third survey respondent said, echoing other sources who noted that the current market reminded of them of that period in the early 2000s when allocation became commonplace.

Hot-rolled

On the hot-rolled coil side, the U.S. was licensed to import 173,071.23 tonnes in February, up 43.8% from a preliminary figure of 120,336.04 tonnes in January and 26.8% above a monthly average of 136,504.70 tonnes over the last two years.

Import licenses are released ahead of preliminary figures. Preliminary data is a more authoritative number but is released later–and so licenses are more useful as an initial snapshot of the import market.

The gains on the hot-rolled scene came as South Korea was licensed to ship 57,487.7 tonnes to the U.S. in February, more than double the 24,183.8 tonnes that arrived in January and marking the highest monthly figure from the East Asian nation since at least February 2019, per Commerce figures.

Increased arrivals from South Korea helped to offset declining U.S. imports of hot-rolled coil from Canada, which dropped 28.3% to 65,849.6 tonnes in February from 91,828.4 tonnes in January.

Canada is typically the largest hot-rolled coil supplier to the U.S. South Korean hot-rolled coil imports have not topped those from Canada in at least two years, Commerce figures indicate.

U.S. and Canadian prices tend to trend together once adjusted for currency. And Canadian sheet mills, like their counterparts in the U.S., have in recent months grappled with outages–both planned and unplanned–that have limited spot supplies. 

Cold-rolled

Cold-rolled coil imports, meanwhile, rose to their highest point since the aftermath of the COVID-19 outbreak last spring.

The U.S. imported 98,609.94 tonnes of cold-rolled coil in February, up 82.7% from 53,977.04 tonnes in January and marking the highest point for cold-rolled imports since 111,140.41 tonnes arrived in May 2020, per Commerce figures.

The cold rolled gains were driven primarily by increased volumes from Australia, Germany and Japan–not countries typically associated with low steel prices.

Australia shipped 15,447.30 tonnes to U.S. ports in February after sending nothing stateside in January. Cold-rolled imports from Germany totaled 10,255.50 tonnes in February, dwarfing January’s 242.90 tonnes. And Japan’s 5,644.20 tonnes last month marked its highest cold-rolled tonnage to the U.S. in at least two years.

Japanese steel suppliers had not previously shipped more than 1,000 tonnes of cold-rolled to the U.S. in any one month since April of last year, according to Commerce figures. 

Plate

Cut-to-length plate imports also rose, mostly on increased tonnage from South Korea, but also on higher volumes from Sweden and Finland.

The U.S. was licensed to import 28,885.97 tonnes of cut-to-length plate in February, up 35% from 21,373.64 tonnes in January and up 48.8% from 19,413.58 tonnes in December.

South Korean imports weighed in at 7,778.20 tonnes, more than four times the 1,770.50 tonnes that arrived in January and marking the first time more than 5,000 tonnes of cut-to-length plate have come in from South Korea since June 2020, per Commerce figures.

As in hot-rolled coil, declining Canadian cold-rolled and plate import volumes were offset by increases in arrivals from overseas locations. 

Slab

Total steel imports sank because of a sharp decline in imports of semifinished slabs. Those volumes tend rise and fall with the quarterly quota mechanism that Brazilian material is subject to as a result of Section 232.

Brazil agreed to a quota in exchange for exemption from the 25% tariff. Because the annual quota specifies quarterly limits, Brazilian slab imports tend to spike in the first month of each quarter and then subside. That was again the case in the first two months of this year.

The U.S. was licensed to import 177,170.50 tonnes of Brazilian slab in February, down 67.7% from the 548,593.2 tonnes that arrived from the South American nation in January, according to Commerce figures.

Brazil’s first quarter quota limit is 1.05 million tons, according to U.S. Customs and Border Protection figues on Section 232 quotas. That means there are approximately 325,000 tonnes left for March in Brazil’s first-quarter slab quota.

Another notable trend in the slab arena: Russia, which is subject to a 25% Section 232 tariff, returned to the market for the first time in approximately a year.

The U.S. imported 50,129.40 tonnes of slabs from Russia in February after bringing in 44,555.70 tonnes in January. Russia had previously shipped no slabs to the U.S. since January 2020, according to Commerce data.

The primary consumers of slabs from Russia are typically the North American subsidiaries of Russian steelmakers Evraz and NLMK. 

The Prices

Despite increased imports, domestic finished steel prices continue to rise and to set new all-time highs.

SMU’s benchmark hot-rolled coil price stands at $1,240 per ton ($62/cwt), up 7.8% from $1,150 per ton a month ago and up 22.8% from $1,010 in early January.

Cold-rolled coil prices are at $1,420 per ton, up 7.6% from $1,320 per ton a month ago and up 26.8% from $1,120 per ton in early January.

Both are well above peaks–$1,070 per ton in the case of hot-rolled and $1,150 per per in the case of cold-rolled–recorded in July 2008, before the financial crisis.

It’s not clear whether that trend of higher prices will continue.

“Imports to the Gulf will be arriving starting in April/May. Already we are seeing customer resistance to paying these high domestic mill prices in the Gulf region,” the first survery respondent said.

And it’s not just imports that might put a lid on U.S. prices. “We are hearing universally now that customers, and their customers, are getting very nervous about their credit lines and the cost of materials derailing consumer demand,” a second survey respondent said.

By Michael Cowden, Michael@SteelMarketUpdate.com