US WFB market stays afloat on small orders

Friday, 03 December 2010 22:38:03 (GMT+3)   |  
       

The domestic WFB market faces flat prices, listless demand and quiet import activity, yet maintains a neutral, rather than downward trend based on a steady stream of small projects.

The stagnant state of the domestic wide flange beam (WFB) market was apparent in early November, when mills kept transaction prices neutral in response to the increase in shredded scrap pricing.  Now that scrap increased by an average of $35-$40/lt this month, mills might try to recoup some of the raw material costs, but probably not all.  The most common expectation is that domestic mills will increase transaction prices by about $1.00 cwt. ($22/mt or $20/nt), but because purchasing activity is so tepid right now, there's a small chance official WFB prices will trend neutral.

For now, domestic mills are getting their asking price of $38.50 cwt. ($849/mt or $770/nt) ex-mill (for ASTM A992, W10 x 10, W18 x 6, and W24 x 7), reflecting no change in the last month, primarily because most purchasing activity, limited as it is, stems from small-scale homebuilders and other light structural projects, whereas demand from the large tract housing and strip mall segments of the construction industry, which could probably force some discounts, is virtually nonexistent. 

The demand situation is illustrated by monthly shipment and inventory levels-service centers and distributors are being very cautious as the end of the year approaches, stocking a little bit of everything instead of large quantities of anything in order to fill their customers' inventory holes.  According to the latest MSCI Metals Activity Report, month-ending inventory levels for beams were at an all-time low (at least as far back as January 2007), at just 476,500 nt in October compared to 529,200 nt in September.  Monthly shipments also dropped in October, to 210,900 nt from 228,900 nt the month prior.

It goes without saying that the weak domestic market has not been amenable to imports, and even though some distributors are currently "entertaining offers," the amount of orders actually booked is negligible.  Even shipments coming in have slowed lately, despite the generous spread between domestic and import prices near the end of summer.  According to import license data from the US Import Monitoring and Analysis System (SIMA), the US imported 11,279 nt of beams in November, a 36.5 percent decrease from October's total.  While every major source of imported beams to the US posted lower numbers in November, some dropped more than others.  Spain's November total of 4,518 mt beams imported to the US represented a 15 percent decline from October; Korea's total of 3,819 mt was 40 percent less; Luxembourg's total of 1,639 mt was 38 percent less; Germany's 1,993 mt was 42 percent less; and Taiwan's November total dropped to just 4 mt from 1,124 mt in October.

While US mills currently have the luxury of not being too concerned with imports, the situation might change soon.  Nucor-Yamato, for example, has been fairly busy lately with piling projects in the ongoing restoration of post-Katrina New Orleans, but those projects will soon come to an end and Nucor will need to find market share elsewhere.  The first half of 2011 could end up mirroring the first half of 2010, when domestic mills were sensitive to imports, especially if ArcelorMittal makes a resurgence in the end of Q1 as anticipated.  For now, the most common offers heard are from Korea, at approximately $36.00 cwt. ($794/mt or $720/nt) duty-paid FOB load truck in West Coast ports, reflecting a $2.00 cwt. ($44/mt or $40/nt) increase from prices reported a month ago.  However, SteelOrbis has learned that most US-based beam buyers will probably not seriously consider imports until after the new year.


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