After the most recent price increase made by US structural products leader Nucor Steel, buyers are now talking about the months to follow, suggesting another price increase is ahead.
Nucor Bar Mill Group has announced to customers that beginning February 1, 2008, the company's raw materials surcharge (RMS) will increase by $4.10 cwt. ($90 /mt or $82 /nt) reflecting the increase in shredded scrap prices seen in January. The company's February RMS will be $11.75 cwt. ($259 /mt or $235 /nt). In addition, Nucor has lowered its base prices for merchant bar products by $1.10 cwt. ($24 /mt or $22 /nt), resulting in an increase of $3.00 cwt. ($66 /mt or $60 /nt) for net transaction prices for February shipments.
Most buyers expected a large jump in prices for February. After shredded scrap prices climbed in December and even more so in January, in order to keep up with the rising raw materials costs, mills were almost forced to up their prices significantly. This increase, however, is very much supply driven. Buyers claim merchant bar demand is still on the soft side, and as prices go up buyers fear the upside-down market could leave some weakness in the future.
Consumption is down, yet prices are going up. Markets such as housing are at an all-time low and this has slowly been taking a negative effect on the commercial construction industry. Where houses are not being built, schools, shopping centers and other large building projects are no longer being constructed. Buyers speculate consumption may improve come spring, but it's widely believed it will not pick up at a rapid pace due to economic factors.
Despite the lull in demand, there is still chatter about more industry-wide increases to come in the next month. One West Coast buyer commented, "This is just the beginning. Prices are going to climb up again in March and I think it will be another huge jump."
Though it is thought that domestic merchant bar prices will rise in March, prices for February shipments are now ranging from $38.10 cwt. to $45.80 cwt. ($840 /mt to $1,010 /mt or $762 /nt to $916 /nt), depending on size, shape and thickness.
Although domestic prices are climbing, import competition is still minimal. Import prices are also increasing, causing the usually attractive price gap between domestic and imported material to be very small. US buyers are not as eager to book large import quantities months in advance because the slightly lower cost does not outweigh the risk. In this economic state, the market could change very quickly, and since the price is not right, domestic material seems more attractive to buyers.
Since import prices are increasing, offers are few. Where Taiwanese offers used to be readily available in the West Coast market, SteelOrbis was informed that there are no offers in existence due to the hefty prices. With billets in Asia costing mills significantly more due to the added Chinese export tax, merchant bar prices are taking a hit and have risen considerably since our last report two weeks ago.
Turkish offers to the Gulf Region are up by approximately $1.00 cwt. since our last report two weeks ago also due to rising billet prices. Billets in the Mediterranean have increased by more than $1.00; however, freight prices have evened out, slightly off-setting the increase.
Turkish offers are now ranging from $40.50 cwt. to $41.50 cwt. ($893 /mt to $915 /mt or $810 /nt to $830 /nt) FOB loaded-truck, US Gulf ports. These offers are for early second quarter arrivals.