CRU: US Sheet Price Rally Might Shift Buyers to Import Market

Market contacts in Europe note that exports from India are being offered to Europe at levels that would become increasingly competitive in the US market should similar offers appear.

The US domestic sheet market is likely to remain tight until production issues at a Mexican producer resolve and more new capacity ramps up.

Future uncertainty restricting import demand

According to the International Trade Administration, January imports of flat products in the US increased from the low levels recorded in November and December yet are 33% lower than January 2022.

Currently, buyers in the US are finding import offers increasingly attractive as mills have announced price increases at a rapid pace in the past few weeks. However, buyers lack confidence that these import prices will be at or below the market when they arrive in three to four months.

As a result, interest in imported material remains low. Yet due to the recent domestic price increases, we expect arrivals to pick up marginally in Q2 2023 from current levels.

Long product buyers hesitant to commit to import lead times

Wire rod end users are in the process of drawing down their current elevated inventories, which we expect to be the case through most of the current quarter. Though import prices for wire rod are currently attractive, buyers are increasingly hesitant to commit to longer lead times as there is considerable risk that domestic prices might fall, making imports unattractive.

According to import data for February, a larger shipment of rebar was imported from Turkey. But more recently, imports have been largely uncompetitive due to rising international prices.

Brazilian slab export prices increased significantly

Brazilian slab export prices increased for a second consecutive month due to higher international prices and better demand.

CRU assessed that Brazilian slab export prices for February increased 17% m/m to $690 per metric ton FOB. The range of slab prices we heard while doing our monthly assessment was $680-700 per metric ton FOB. We also heard some offers in the range of $750-800 per metric ton FOB for April shipments. And we expect to see upward pressure on prices in the coming weeks.

In terms of trade, Brazilian slab exports increased again in January, and this time by 12% m/m. The primary export destination was North America, as usual, with the US accounting for most of the exports out of Brazil. For imports, we have seen for the second consecutive month an inflow of Russian slabs into Brazil. Brazil has not imposed sanctions on Russian material. Prior to the past two months, the country had not imported Russian slabs since November 2021.

Outlook: Sheet imports becoming more attractive

We expect the US sheet market to remain tight as supply availability will need to improve before prices stop rising. Therefore, the ongoing price rally within the country will likely continue over the near term. Sheet imports are now becoming a competitive factor as domestic mills target price levels for HR coil that are significantly higher than global prices.

By Brett Reed, brett.reed@crugroup.com