Many US merchant bar buyers have started the New Year busier than they have been in the past couple of months, inquiring about the most recent prices and lead times; however, the downfall of the economy and looming credit crisis are still preventing normal restocking activity and as a result overall demand still remains weak.
Nonetheless, while current activity remains slow and the domestic pricing is trending sideways, there are indications that the merchant bar market could improve over the next couple of months. The fourth quarter was a contraction period for inventories and the conditions should get better starting in the late first quarter and improve further in the second quarter. Service centers eventually need to restock and as the downward pricing pressure has now lifted, they might release their pent-up purchases shortly. Also, many construction projects were put on hold in the last three months and some of them are expected to restart.
All eyes will be on President-elect Obama over the next several weeks to months, and the extent to which his proposed national economic stimulus package will emphasize bar product-intensive "shovel ready" infrastructure projects. Needless to say, the industry is anxious for these projects to be implemented.
Another factor that supports further strengthening of bar prices is that shredded scrap prices have shown a modest turnaround this month, with the raw materials surcharge (RMS) for long products heading up $8 /nt ($0.40 cwt. or $9 /mt), making for the second increase in two consecutive months. However, pricing leader Nucor is not expected to change effective prices this time, keeping net prices stable as they did for January shipments.
Official domestic merchant bar prices are expected to remain the same through February, with offers continuing to range from $41.55 cwt. to $49.25 cwt. ($916 /mt to $1,086 /mt or $831 /nt to $985 /nt) ex-mill depending on size, shape, thickness. There are transactions below this level, however, for large orders and customers. The pricing gap between US merchant bars and rebars has become more pronounced, though, as domestic rebar spot prices have continued to decline in recent weeks.
According to the Metal Service Center Institute (MSCI) shipment and inventory report, the slowdown in overall merchant bar demand has resulted in fewer daily shipments, and even though the tonnage of inventory has shrunk, inventories have also been spending more time in the warehouse. There was just over 920,000 nt of merchant bar inventory in November 2008, compared to almost 992,000 nt of inventory in October 2008, and about 1.1 million nt in November 2007. Despite having much less inventory in house during the month of November 2008, the amount of time the inventory stayed in the warehouse was equivalent to about 3.5 months, compared to only 2.8 months in October 2008, and 2.9 months in November 2007. November 2008 daily shipments for merchant bars totaled only 13,700 nt, compared to 15,300 nt in October 2008 and 17,600 nt in November 2007.On the import side, some offers are beginning to attract more interest as foreign mills attempt to widen the price gap from domestic offers.
Mexico, South Korea and Taiwan have been consistently offering merchant bar products for around $34.00 to $35.00 cwt. ($750 /mt or $680 /nt add conversions). Mexican offers are delivered to California and Texas, while South Korean and Taiwanese offers are duty-paid, FOB loaded truck in West Coast ports.
Meanwhile, Turkish import offers to the US are currently in the range of approximately $34.00 cwt. to $35.00 cwt. ($750 /mt to $772 /mt or $680 /nt to $700 /nt) duty-paid, FOB loaded truck in US Gulf ports.
License Data from the US Steel Import Monitoring and Analysis System (SIMA) demonstrate that merchant bar import arrivals have continued their steady decline since the second half of 2008. In June 2008, worldwide import tonnage to the US for merchant bar products totaled 15,978 mt. Since then, monthly merchant bar import totals have slid every month, demonstrating the following monthly totals: July - 14,973 mt; August - 11,293 mt; September - 9,647 mt; October - 8,693 mt; November - 6,796 mt; and December - 4,637 mt. Canada has consistently remained the import leader over this time period and accounted for an estimated 2,887 mt in December. 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).