Since SteelOrbis' last merchant bar analysis posted two weeks ago, the market dynamics have shifted as buyers suspect a price decrease is ahead.
Official scrap numbers for August are out, and shredded scrap prices have plunged approximately $60 /lt from July prices. Despite earlier reports that domestic merchant bar producers may keep prices stable, most buyers suspect a price decrease is coming for September orders. The question is: how big of a decrease will it be?
At press time, September prices were still not disclosed to customers, although most buyers were in agreement that a price decrease of a magnitude of approximately $30 /nt ($1.50 cwt. or $33 /mt), about half of the scrap price decrease, could occur.
One buyer commented, "I think domestic mills have to be somewhat responsible to the marketplace. For the long-term health of the market, if scrap prices drop, domestic mills have to lower their prices at least part of the raw materials surcharge (RMS) decrease."
Other buyers stated that every time scrap prices increased heavily, domestic mills raised their transaction prices, so now that scrap prices have fallen by a significant amount, transaction prices should come down.
Besides the raw materials logic that buyers are suggesting, demand has also softened in recent weeks. This could be summer doldrums, but it could also be the market weakening in general. Going into the fourth quarter, the market is said to soften some more and prices are expected to be at lower numbers than they are currently.
For the remainder of August, Nucor's raw materials surcharge (RMS) is $443 /nt ($22.15 cwt. or $488 /mt). Domestic merchant bar prices are ranging from $53.70 cwt. to $61.40 cwt. ($1,184 /mt to $1,354 /mt or $1,074 /nt to $1,228 /nt) depending on size, shape, and thickness. However, the pricing trend is down, as September prices are expected to soften.
The import side of the business has also seen some softening lately as well. Although import offers are still on the high side, prices have been slipping, and may start to become competitive with domestic prices in the coming months.
Merchant bar offers from Taiwan have surfaced and are in the range of $59.00 cwt. to $61.00 cwt. ($1,301 /mt to $1,345 /mt or $1,180 /nt to $1,220 /nt) FOB loaded truck West Coast ports.
Turkey is still offering with numbers significantly lower than their previous offers. Offers from Turkey are now in the range of $65.00 cwt. to $67.00 cwt. ($1,433 /mt to $1,477 /mt or $1,300 /nt to $1,340 /nt) FOB loaded truck West Coast ports.
Mexican tonnage is also available in Houston, TX with offers slightly lower than domestic prices.