US merchant bar market – When will the increases cease?

Monday, 26 May 2008 10:59:56 (GMT+3)   |  
       

The second quarter will end with domestic merchant bar prices up for June shipments, and it is now looking like the third quarter will be starting off with a new price increase. 

In mid-May Nucor announced to its customers that effective with shipments as of June 1, 2008, the company's raw materials surcharge (RMS) will be $403 /nt ($444 /mt or $20.15 cwt.), representing an increase of $10 /nt ($11 /mt or $0.50 cwt.) when compared to the May RMS. The company also increased its base prices by $30/nt ($33 /mt or $1.50 cwt.), resulting in a total increase of $40 /nt ($44 /mt or $2.00 cwt.) in transaction prices.

This most recent domestic price increase for June shipments is the industry's fifth price increase this year for merchant bar products. In total, the US market has seen $297 /nt ($327 /mt or $14.85 cwt.) in increases year-to-date. 

The talk is that another increase is coming at the start of the third quarter. Scrap prices are still trending upwards, at least slightly, but more importantly, there is room for domestic prices to increase. Compared with international levels, domestic merchant bar prices are on the low side, even with all the increases that have taken place over the course of the year. Also, since these international numbers are so high, very few import offers are surfacing, as traders know their domestic customers would not be willing to buy at such hefty numbers. Offshore offers are finding their way to other markets, such as Europe and the Middle East where the demand is much stronger and buyers are willing to pay the high prices. 

US buyers suspect that if scrap only climbs another $10 /lt in early June, domestic merchant bar mills will again raise their base prices in addition to raising the RMS, resulting in a higher net transaction price. Industry leaders' chatter suggests a net increase in the area of $40 /nt to $60 /nt ($44 /mt to $66 /mt or $2.00 cwt. to $3.00 cwt.) is on its way for July shipments.

Through the month of June, however, domestic merchant bar prices are ranging from $48.70 cwt. to $56.40 cwt. ($1,074 /mt to $1,243 /mt or $974 /nt to $1,128 /nt) depending on size, shape, and thickness. 

On the import side, a large portion of the usual countries that have offered to the US in the past have not made an offering to the US in quite some time. Turkey continues to offer some tonnage since their mills have the capability to produce those rare, smaller sizes that are difficult to get domestically; however, no one is even considering importing the material because their numbers are not workable.


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