After US merchant bar mills decreasing transaction prices by $2.00 cwt. ($44 /mt or $40 /nt) during the first week of September, activity has remained weak and domestic mills are just hoping to keep prices neutral throughout the fourth quarter.
Many distributors believe that the $2.00 cwt. domestic transaction price decrease last month was a result of positioning amongst mills, most notably Commercial Metals Company (CMC), Nucor, and Gerdau Ameristeel, which all announced nearly identical price decrease announcements last month last month in quick succession. However, since the announcement, activity has been just as lackluster as before, with distributors continuing to de-stock inventory in preparation for end-of-year taxes. As SteelOrbis previously reported, following their September 3 price decrease for merchant bars, mills announced that they would keep transaction prices unchanged in October. Now that it is almost time for November pricing to be announced, demand has yet to improve, and there is a good likelihood that domestic mills will try to keep prices flat for another month, though another price decrease wouldn't be out of the question either.
Nevertheless, spot prices appear to be right around listed mill transaction prices now, whereas a month ago actual spot deals were running a couple dollars per hundredweight below list prices. Current published domestic merchant bar transaction prices for October lie within the range of $34.05 cwt. to $39.25 cwt. ($751 /mt to $865 /mt or $681 /nt to $785 /nt) ex-mill depending on size, shape and thickness. And although demand is well below manageable levels, mills are reluctant to give additional discounts. At this point in the year it is fairly safe to say that no one really wants to buy merchant bars, but if they need to a slightly lower price probably won't make too much of a impact on their buying decision.
However, if push comes to shove, domestic mills may be willing to give in a little. Their primary concern is to just get whatever orders they can before the holiday season is in full swing and demand dies down even further. So far, things don't look too good. According to the latest Metal Service Center Institute (MSCI) shipment and inventory report, daily and monthly shipments of structural steel from US service centers decreased further from July to August, from 10,800 nt to 10,200 nt, and from 238,000 nt to 214,000 nt respectively. Meanwhile, inventories increased for the third consecutive month in August, from 536,000 nt in July to 550,000 nt in August. But even more significant is that the estimated average monthly inventory overhang jumped up from 2.3 months in July to 2.6 months in August. Excess inventory combined with softening scrap prices and the normally slow holiday season is not a good mix for domestic mills and the merchant bar market.
Furthermore, mills have been receiving a little more pressure on pricing from the import market, most notably Mexico. Mexico mills have followed US mills in recent weeks, dropping merchant bar offers by $2.00 cwt. ($44 /mt or $40 /nt), and are now offering at approximately $30.00 cwt. to $31.00 cwt. ($661 /mt to $683 /mt or $600 to $620 / nt) FOB delivered to Texas and California. Mexican imports have not been booking with any kind of regularity, but the threat is just enough to keep domestic mills on their toes.
Regarding offshore merchant bar imports, there are not many interesting offers out there. Taiwan has been offering delivered to West Coast ports at rates similar to domestic US offers, while some angles have been booked out of Korea and small quantities of niche items are coming over from Turkey. Neither Korean nor Turkish offers are for common merchant bar sizes.
According to preliminary census data from the US Steel Import Monitoring and Analysis System (SIMA), total monthly merchant bar imports from the US decreased nearly 60 percent in August from July, falling from4,605 mt to 10,691 mt , after nearly doubling in tonnage from June to July. The two primary sources of import merchant bars to the US were its bordering neighbors of Mexico and Canada, with 2,496 mt and 2,102 mt respectively.