US buyers unfazed by expected hot rolled coil price moves
There was word March 16 in the US hot-rolled coil market--among several traders and big service-center buyers--that Nucor is preparing to soon open its May spot book for HRC orders, and most sources expected another fairly strong attempt to push the price higher.
“The marketplace is not really ready for another hike,” a major Southeast service center buyer told Platts, “but a $40 price-hike announcement would not be a surprise.”
In an earnings conference call, however, at least one producer stated that its earlier-announced price hikes were indeed being accepted by steel consumers. "We are seeing our Marc
h and April price increases stick in the market" said Jim Bouchard, Wheeling-Pittsburgh and Esmark CEO. In early March, Wheeling-Pitt said it would raise transaction prices of all flat-rolled products by $50/st on orders scheduled for shipments effective April 1, 2007.
Meanwhile, several Nucor customers offered as explanation for the steelmakers’ anticipated price hike that the steelmaker still needs to get its spot price more in line with its contract business. Its typical contract deal, which carries a surcharge for scrap, is now at about $620/st ex-works (EXW), which is considerably higher than spot transactions.
“Nucor’s been trying to get $580/st EXW for April rollings, and even that’s been a stretch,” said an East Coast service-center buyer.
Integrated producers appear to now have a raw material cost advantage over flat-rolling mini-mills that are paying near-record prices for scrap, merchant pig iron and steel scrap substitutes like DRI.
For example, one big trader told Platts that Mittal Steel USA’s April bookings have been at $550/st, EXW Indiana, about $30/st below Nucor’s asking price.
“There is upward pressure on pricing,” he said, “but still a wide disparity. When you look at what’s been announced already and what material is actually bought for, they are two completely different things,” said the southern service-center source.
That was reflected in reported transactions to Platts. The US HRC price assessment moved up earlier this week to a midpoint of $544.50/st. US buyers insist there is little end-use demand pull, and that the price hike attempts by the mills are being instigated primarily as a cost-push.
Meanwhile, although the HRC market in Europe is stronger than that in the US, a similar dynamic is at work. European mills are aiming to push up prices, but buyers are hesitant to buy.
The Platts assessment for HRC held steady at a mid-point Eur505/mt ($672), EXW Ruhr, Friday, while the CIF Antwerp price was unchanged at Eur485/mt. The Platts assessment for HRC basis FOB Black Sea remained at mid-point $550/mt Thursday.
When comparing the US EXW Indiana price with Europe’s EXW Ruhr price the difference is about $60/mt. Some US mills might be able to export given such a spread, but as traders indicated to Platts earlier this week, that’s somewhat tight after freight and other costs are considered.
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