The US domestic merchant bar pricing trend is strongly up, with prices expected to increase again as the second quarter comes to a close.
The steel industry has seen a wave of increases this year, bringing prices for many products to historically high levels; merchant bar products have yet to escape this upward pricing trend. So far this year, domestic merchant bar mills have upped their prices by a total of $257 /nt ($12.85 cwt. or $283 /mt), and market sources believe that another increase is on the way.
Although Nucor increased its transaction prices for merchant bar products every month so far this year, except in March when the company kept prices stable, domestic pricing levels are still much lower than their international counterparts. Even after the most recent jump of $147 /nt ($7.35 cwt. or $162 /mt) that Nucor implemented, domestic prices are still, on average, about $7.00 cwt. ($154 /mt or $140 /nt) lower than prices seen from offshore suppliers.
In addition to the large price gap seen between domestic and import prices, shredded scrap prices in the US are expected to climb by approximately $30 to $50 /long ton in early May. Though this is a mild increase when compared to the leap taken in April, it is nonetheless an increase, and it will push up raw material costs for domestic mills. With the combination of higher scrap costs and weak import competition due to the skyrocketing prices, it is extremely likely that come June, the steel industry will see another price increase for merchant bar products. Even if shredded scrap prices only go up slightly, merchant bar mills may still raise their prices above and beyond the amount of the scrap price increase to try to catch up with world prices.
To recap, since the beginning of this year, domestic merchant bar prices have done the following: increased by $25 /nt for January shipments, $60 /nt for February, remained stable for March, increased by $25 for April, and currently have increased by $147 /nt for the remainder of April and for May shipments. So what will be the add-on for June shipments?
Until the next announcement, domestic merchant bar prices are in the range of $46.70 cwt. to $54.40 cwt. ($1,030 /mt to $1,199 /mt or $934 /nt to $1,088 /nt) depending on size, shape and thickness. Almost everyone believes that domestic pricing is still trending strongly up; the only question is: how high will it rise?
On the import side, business is continuing to shrink. A large portion of the usual countries that have offered to the US in the past have not made an offering in quite some time. Turkey continues to offer some tonnage since their mills have the capabilities to produce those rare, smaller sizes that are difficult to get; however, no one is even considering importing the material because their numbers are not workable. Turkish offerings are approximately 15 percent higher than the domestic price.
License data from the US Import Administration show a significant decline in import tonnage in the US for light bar shapes when comparing March and April 2008. In March, worldwide tonnage to the US totaled 13,122 mt, while data collected up through April 22 shows only 5,851 mt. Mexico and Canada exported the bulk of the material to the US in April with 3,187 mt and 2,125 mt respectively. The data are for light sections of carbon and alloy steel, U, I, L, T and H shapes of 3" or smaller (rounds, squares, or flats are not included).