The Summer Slowdown Appears Poised to Push Into The Fall for Steel Importers

The summer slowdown appears poised to push into the fall for steel importers as excess domestic supply and low prices are eroding margins, market participants told AMM. Across the board, traders and service centers cited uncertainty in the marketplace and long lead times from foreign suppliers as key reasons why the import market is in a funk. "There is way too much domestic steel, " one trader said, referring to simultaneous ramp-ups at Severstal Columbus LLC, Columbus, Miss.; ThyssenKrupp Steel USA LLC, Calvert, Ala.; and RG Steel LLC, Sparrows Point, Md. The new capacity has heightened concerns over its impact on pricing, which has softened in recent weeks. "If everyone's math is the same, they (domestic producers) are breaking even if they sell a little below $600 per ton, " a service center source said. "The big domestic mills are chasing a downward sloping demand curve, and that's not the smart thing to do. " With product from South America taking three or three-and-a-half months to arrive in the United States and material from Asia requiring a four-and-a-half- to five-month wait, U. S. buyers simply don't want to assume the risk that comes with committing to prices that are increasingly volatile and might change by the time the steel arrives. And market sources said they don't think market conditions will improve going forward. Domestic flat-product prices are on a downtrend, with hot-rolled sheet dropping to around $660 per ton (AMM, Aug. 3). Against a backdrop of falling domestic prices, importers are finding it difficult to compete in hot-rolled coil, with most selling in the $640- to $660-per-ton range and one as low as $610 per ton. A service center source noted that even if imported hot-rolled sheet were offered at $610 per ton, it would still be too risky to buy so far in advance. A second service center source said that due to the risk tied to long lead times, it would only be beneficial to buy imported material if prices were $100 to $150 per ton below domestic tags. Some traders said that buyers were trying to mediate that risk by asking for an additional 10-percent discount or more on foreign product. Market sources peg imported cold-rolled coil at around $720 to $760 per ton. Cold-rolled sheet prices generally run $100 to $120 per ton higher than hot-rolled product domestically, and that spread is squeezed for imported material. Plate, one of the few imported products holding its ground, has been relatively strong due to activity in the oil and gas industry and the agricultural sector. Heavy plate tags are in the $880- to $960-per-ton range, with sources saying transactions were on the lower end, while medium plate prices were pegged at $840 to $880 per ton. Hot-dipped galvanized coil sales have been limited, with traders reporting prices at the lower end of a $950- to $975-per-ton range. Market players note, however, that spot transactions were scarce. "No one is importing (hot-dipped) galvanized (coil) any more_there's just no market there, " the first trader said. The prospect of razor-thin margins has had a dramatic impact in the long products arena, where low domestic prices have virtually forced importers out of the market. "We were doing well from December to April and had a good number of orders booked (for beams), " a second trader said, noting that most of the material is being imported from Mexico and South Korea. "But since April that number has dropped off. It looks like construction is the last sector to recover, and in many cases there just isn't enough confidence in the market. " Reinforcing bar, which is imported mainly from Turkey and Mexico, has seen very little movement since spring, with some traders reporting transactions between $670 and $690 per ton. A third trader said there have been virtually no shipments of rebar from Turkey recently, with most of the material coming via rail or truck from Mexico because of a shorter lead time of two to three weeks. The second service center source said he was buying rebar from a domestic mill for a little more than $700 per ton, so there was little incentive to purchase imported product. "Some domestic mills are now offering to match the price of imported rebar, " the third trader said. "There is a very small market for it (imports). " With transactions dropping off, one trader questioned the price movements. "The market has gone to the mentality that to take risk associated with imported steel, they want it at a great discount to the domestic market, " he said. "The prices that are set right now are emotional; there's no formula to it. " Source: metalbulletin.com