Foreign Steel - When will it flood U.S. Shores?
SMU expects the U.S. will see more international steel coming into the country over the next two to three months as savvy buyers were able to take advantage of niche offers out of China, India, Taiwan, Korea and Russia. Trading companies are telling us the number of inquiries for international steel has grown but most buyers continue to be wary of placing orders at pricing similar to domestic and lead times which extend out to June.
SMU has seen the Chinese become more aggressive on light gauge galvanized products (.012”) taking the Indian mills position as price leader for the niche products over the past month or two. Orders were placed for May arrival in the low $40’s CIF, Duty Paid, loaded truck, Gulf port. Domestic pricing for March production is running in the high $40’s to low $50’s from the mills east of the Rockies and in the mid 40’s from at least one source mill on the West Coast.
One source made us aware of one order of Russian HR for shipment to the Detroit/Chicago markets for April arrival. We were advised this was the first sale from the source mill in the past two years. However, since that order was placed prices have risen and the feeling is the Russian mills may be priced out of the U.S. market.
Our SMU Market Survey which was conducted this past week found 30% of the service centers and manufacturing companies polled considered international steel a viable option. Most companies, however, are wary of buying foreign steel due to the long lead times, price differentials not worth the risk and many question the domestic steel industry ability to maintain price discipline in the 2nd Quarter once new mill capacity comes back online at all three of the integrated mills. During the survey process one large Western service center spelled out their company’s reservations about taking price risk on foreign steel, “Too much concern over possible downward market movement in 2nd Qtr due to weak demand, the end of inventory building, and additional melt coming back on line.”
Domestic lead times continue to be relatively short and, as many buyers have pointed out to SMU in recent days, there is no problem getting steel. Service center buyers in particular have identified mills with short lead times and their ability to get commodity grade products very quickly if needed. In the most recent Nucor Berkeley lead time chart they are showing their HR lead time to be the week ending 2/27 – three weeks…while their galvanized is out to late March (the conversion mills tend to be in mid to late March on galvanized). The short domestic lead times are making steel buyers nervous and reticent to purchase international steel.
As China prepares to go on extended holiday to celebrate their Chinese New Year, all eyes are on China to see what direction the country will head upon their return. Much like Punxsutawney Phil – the North American steel industry is waiting to see if the Chinese will see their shadow upon their return from holiday and what will that mean to the rest of the world both for commodities and steel pricing.