Earlier this week, SteelOrbis reported Nucor Bar Mill Group's $5.00 cwt. ($110 /mt or $100 /nt) transaction price reduction for US domestic merchant bar and structural products. This was quite an unusual pricing move on the part of Nucor, as most buyers expect price announcements to be made after the new scrap numbers are out, not before. The decrease was sudden and significant, making it clear the US merchant bar market is no stronger than the other steel product markets in North America.
It is an undeniable fact by now that demand is extremely weak and that lowering prices does not necessarily lead to more demand; however, the official merchant bar prices were listed at numbers significantly higher than those for other long products, such as rebars and wire rods. For several weeks now, SteelOrbis has reported that the actual transactions have regularly been taking place at up to $5.00 cwt below the list prices. With this move, Nucor was likely aiming to to bring its list prices closer to the actual spot prices at which business is transacted. However, the sudden and sharp decrease has also caused some grief among service centers.
One service center executive told SteelOrbis, ""Now that Nucor's announcement is out, customers are continually trying to break bundles and demand deep discounts upwards of 25 percent."
While most of these aggressive demands will not be met, some will, which, combined with the overall lack of demand, may force official prices to come down even further over the next month or so.
Meanwhile, Monday's $5.00 cwt. decrease to official domestic merchant bar prices has dropped the published domestic range to $35.05 cwt. to $40.25 cwt. ($773 /mt to $887 /mt or $701 /nt to $805 /nt) ex-mill depending on size, shape and thickness. Furthermore, most domestic mills may be willing to offer some discounts for quick delivery orders. In comparison, US rebars are trading at about $25.00 to $26.00 cwt. ($551 /mt to $573 /mt or $500 /nt to $520 /nt) ex-mill. The big price discrepancy between merchant bars and rebars, coupled with the weak demand for merchant bars suggest there may likely be more decreases to come for merchant bars.
On the import side, most foreign merchant bar offers to the US are having difficulty attracting serious interest. Lead times and credit concerns continue to be a daunting issue in this economic climate for importers, but now they are beginning to lose the battle of pricing to domestic mills as well.
Nonetheless, Mexico continues to be the strongest importing source to the US, primarily due to Mexican mills' flexibility and significantly shorter lead times compared to their foreign counterparts. South Korea has also been attempting to stay competitive on the West Coast. South Korean and Mexican offers are both trending down and are currently offered in the low $30s cwt. ($661 /mt or $600 /nt); however, Korean lead times cannot easily compete with Mexican mills' delivery and price flexibility. Mexican offers are delivered to California and Texas, while Korean offers are duty-paid, FOB loaded truck in West Coast ports.
It is also difficult to put Turkish shipments together due to decreased tonnages and lack of vessel availability. However, Turkish offers are still made via containers to various ports. Prices range from $31.00 cwt to $35.00 cwt. duty-paid, FOB loaded truck in US ports, depending on the port and size mix.
License Data from the US Steel Import Monitoring and Analysis System (SIMA) demonstrate that Canada and Mexico exported more merchant bar products to the US than any other foreign countries in February, with 3,096 mt and 2,766 mt respectively, for the eighth consecutive month. The data are for light sections of carbon and alloy steel, U, I, L, T and H shapes of 3" or smaller (does not include rounds, squares, or flats).