Both
US domestic and import
merchant bar markets are continually showing signs of weakening as the fourth quarter continues, raising questions as to when we will see signs of improvement.
The
US domestic
merchant bar market has seen better days. The market is continually softening, with mills less busy and service centers unwilling to buy. The market is not terrible right now, but it is by no means as strong as it was in Q2. The steel market usually slows down in the fourth quarter, but this year's fourth quarter is a little slower than usual.
Service centers have record-high inventories and are trying their best to shift products in order to avoid paying heavy year-end taxes. Residential
construction is very slow, and with the winter months approaching, the now robust non-residential
construction sector may falter as well, thus further reducing demand for
merchant bar.
When shredded
scrap prices fell approximately $30 per long ton in mid-October,
Nucor lowered their RMS by $15 /nt ($0.75 cwt.). They did not raise base prices to make up for the decrease, resulting in a $15 /nt drop in
merchant bar transaction prices. This month, we may see the
scrap market weaken further, as auto bundle prices have fallen some this week.
Scrap prices have not gone down yet, but if they do, this would likely lead to another decrease in domestic
merchant bar prices.
For now, transaction prices for merchant bars range from $29.60 cwt. (e.g. 2 x 2 x ¼ angles) to $37.70 cwt. ($681 /mt to $848 /mt or $618 /nt to $769 /nt), depending on size, shape, and thickness.
Merchant bar import shipments to the
US have been suffering as well. With the high inventories at steel service centers, new buying activity has been minimal. License data from the United States Import Administration shows a slight decline in import activity from September to October 2006. Worldwide exports to the
US for small sections in September 2006 totaled 28,738 metric tons while October numbers totaled 22,401 metric tons. During October,
Mexico,
Malaysia, and
Canada were all major players, with tonnage that comprised more than half of the total 22,401 metric tons of merchant bars exported to the
US that month. The data is 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).
Brazil has been supplying the
US with more small sections lately, with import tonnage increasing from September to October.
Brazil is expected to become a bigger player in the
US merchant bar market in the near future due to their currently weak domestic
consumption levels.
Along with
Brazil,
China has been producing more large structurals with more export activity to the
US lately, and is also expected to become a major market player in the near future.
China's bar products are expected to get a boost from the new export tax for billets. Billets are expected to become more plentiful in
China and will be easily converted to merchant bars.
In
Turkey,
billet prices have been decreasing, causing
merchant bar numbers to decrease by $0.50 cwt. Turkish
merchant bar offerings now range from $31.50 cwt. to $32. 50 cwt. ($694 /mt to $717 /mt or $630 /nt to $650 /nt) FOB loaded-truck,
US Gulf ports.
Brazil's and
China's entrance into the
US market, however, is causing
Turkey to become less of a factor.
Taiwanese
merchant bar offers have remained the same since our last report, still in the range of $30.00 cwt. to $31.00 cwt. ($661 /mt to $683 /mt or $600 /nt to $620 /nt) FOB loaded-truck, at Gulf and West Coast ports.