Although shredded scrap prices in the US are trending downwards, US domestic merchant bar prices are not expected to share the same fate.
US scrap brokers are commenting that although industrial scrap prices are seeing some upward momentum, shredded scrap prices are on their way down. Shredded scrap prices are said to be down approximately $20 /lt to $30 /lt, making it questionable as to whether North America's long products leader, Nucor, will hold prices steady for July, or raise its prices as the market originally anticipated.
Most buyers agree that there is a very slim possibility that domestic merchant bar prices will decrease come July, regardless of what shredded scrap prices do; however, with the new shredded scrap developments, there is a slight possibility that prices will hold firm instead of moving up.
Compared with international levels, domestic merchant bar prices are on the low side, even with all of the increases that have taken place over the course of the year. Also, since these international numbers are so high, very few import offers are surfacing, as traders know their domestic customers would not be willing to buy at such hefty numbers. This gives domestic mills the upper hand, so why in a market that is showing decent demand would the mills lower their prices?
In order to keep a satisfied customer base, again, there is a possibility that domestic mills will keep prices stable in July. With scrap trending downwards, there is not a clear justification for mills to boost prices as there has been in recent months. On the other hand, domestic mills are quoting prices that are quite low on a global scale, and with the mere $40 /nt ($2.00 cwt. or $44 /mt) increase that was added to June orders, there is certainly room for an increase.
Currently, domestic merchant bar prices are ranging from $48.70 cwt. to $56.40 cwt. ($1,074 /mt to $1,243 /mt or $974 /nt to $1,128 /nt) depending on size, shape, and thickness. Prices for July are expected to be announced by the end of next week.
In total, the US merchant bar market has seen $297 /nt ($327 /mt or $14.85 cwt.) in increases year-to-date. Though this may sound drastic, import offers have seen increases that far exceed that. Most countries have pulled away from offering to the US market for two reasons: they know their numbers are too high for the US market to accept, and other markets, such as the Middle East, will gladly pay the price.
According to data from the US Import Administration, the US imported 13,605 mt of light bar shapes in April, although 95 percent of this tonnage was from Canada and Mexico. In May, a similar pattern was noticed, with the US importing 11,518 mt of light bar shapes, of which 82 percent came from Canada and Mexico. 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).