International Steel Prices

Foreign Steel Market Tightens & Traders Believe Buyers are at Risk

March 31, 2016

When it comes to foreign steel and foreign steel offers, what was true two weeks ago is no longer, according to the trading companies we spoke with over the past 24 hours.

We spoke with a trading company about the light gauge galvanized business and we were told, “Four offers were pulled just last night.” He went on to say, “Hot rolled and scrap are going up in price. It has massive momentum. Increases that were $40 per ton, now they [foreign mills] want another $100 on top of the $40.” He went on to say, “I don’t think I could book tons today even if I offered to pay one hundred dollars more….”

We were told .012 material that was being sold around $30.00/cwt not that long ago is now being offered at $40.00/cwt and there probably isn’t enough tons from the handful of foreign producers to cover the needs of the U.S. customers. Of course steel buyers are in shock and not exactly excited to pay $100 to $200 per ton more than their last order…

“What I thought was going to happen when the dumping suits occurred is happening now,” is what one trader told us. He told us many companies built up inventories anticipating the suits but over time the buyers have relaxed and may not have covered their needs as far out as what might be needed to get over this hump in the market. “The month of March was quiet,” we were told, “our customers haven’t grasped what is happening.”

We were told the India mills that were supplying 20,000-40,000 tons per month of very light gauge galvanized as well as the 3-4 Chinese mills that were supplying the product are now out of the market. The mills in the UAE, Pakistan, Vietnam, South Africa and Turkey combined could not handle all of the light gauge galvanized business. We were told by a light gauge buyer that Mexico was not a factor like they used to be in the southern U.S. market.

Because of the limited number of suppliers (worldwide) as well as the limited suppliers in the United States (The Techs, Wheeling Nisshin, NLMK Sharon, CSN, Nucor Berkeley, California Steel and Dofasco in Canada), we were told there may be enough momentum to take the .012 number to $50.00/cwt. The U.S. market hasn’t seen .012 galvanized prices anywhere near $50.00/cwt since before the Great Recession. Will it happen now, we don’t know, but buyers of the product should be aware that the markets have changed, at least for awhile.

So, what is driving the foreign markets? China, China and the China effect (and a touch dumping suits here in the U.S.). Out of Asia we heard from one of our trading sources that the issues began about one month ago and prices have been charging higher ever since. “Billets prices were at USD235/mt FOB ST LSD and jumped to USD240/mt, then USD245/mt, then USD250/mt and now we are at USD315/mt. HRC prices are now at USD380/mt FOB ST LSD from USD300/mt FOB. Cancellations are not only in China my friend as when Chinese prices started upwards, so did Russian/Ukrainian and they have cancelled cargoes just as China has…”

Another source told SMU, “Foreign is strange. Few offers out there. New markets seem to have opened up and tons are going elsewhere and as a consequence traders are hesitate to ‘wing it’ and prefer to only quote when they have an absolutely firm price from their supplier…and that supplier is not entirely sure of their replacement cost…this creates a little uncertainty.”

A trader on the West Coast told us that offers out of Vietnam and other sources were up $80-$120 a ton with very few sources actually quoting anything at all. We were told the UAE, Vietnamese and other mills which utilize substrate from China have had either their supply disrupted (orders cancelled) or prices were up by as much as $160 per metric ton.

Another West Coast trader when asked about Vietnam told us, “Although I’m not connected to VN, I can tell you that the entire Asia area is in turmoil over HR band/substrate pricing the mills are contending with. Prices seem to be out of control or unstable at best. The mills are very worried about covering orders when their input costs are bouncing around. This as you might imagine is contributing to cancellations and late shipments.”

If you have purchased foreign steel within the past week and have not yet received written confirmation you may want to double check to make sure your order (and pricing) are still intact.

When it comes to foreign mills and quotes for export to the United States the word of the day is “uncertainty” which leads to volatility.

At the same time, when it comes to the domestic mills here in the United States the words we are beginning to hear is “controlled order entry” which also points to volatility.

The next month or two could get interesting.

Now, having said that, my Asian friend quoted above always tries to look at the Chinese with skepticism. He told me, “You have heard of the mill closures which took place 3 months ago, well they are “back” now and running. Nothing ever really closes down in China.When the market starts to fall, it will hit hard and look for that to happen in end April.”

Enjoy the ride…