US wide flange beam (WFB) producers appear ready to increase prices for October shipments despite a significant gap between list prices and spot offers, as well as the looming holiday season.
Weakness in US beam demand is commonly attributed to the late burst of the commercial construction bubble. While the residential housing market fell apart much earlier and is now showing signs of recovery, the commercial construction bust lagged behind that of the housing market, and is still some quarters away from recovery.
In contrast to the slight up-tick recently seen in merchant bar spot offers, little has changed in the US WFB spot market since mills announced earlier this month that September transaction prices would remain unchanged from August levels. Distributors have informed SteelOrbis that it is fairly well-known that major domestic WFB producers remain aggressive in their pricing and that most are offering "under the table" discounts or rebates to get business.
US WFB demand remains weak and according to the latest monthly Metal Service Center Institute (MSCI) shipment and inventory report, structural products are the only of five reported products for which US service center shipments decreased on both a daily and monthly basis in July.
Structural products were also the only steel product line measured by MSCI to increase in total inventory volume and average inventory overhang from June to July. Daily and monthly shipments decreased from 10,900 nt to 10,800 nt, and from 239,000 nt to 238,000 nt respectively from June to July, while monthly inventories increased from 529,000 nt in June to 536,000 nt in July. The average monthly inventory overhang increased from an estimated 2.2 months in June to 2.3 months in July.
For now, Nucor's list price for WFBs (ASTM A992, W10 x 10, W18 x 6, W24 x 7) remains at $37.75 cwt. ($832 /mt or $755 /nt) ex-mill. However, most domestic spot transactions are being seen at around $34.00 cwt. to $35.00 cwt. ($750 /mt to $772 /mt or $680 /nt to $700 /nt) ex-mill, and some orders can possibly be negotiated even further downward, depending on order size and specifics.
Nevertheless, domestic longs mills' scrap costs are expected to increase by at least another $1.00 cwt. ($22 /mt or $20 /nt) next month. Many distributors believe that domestic mills will continue to ride the momentum of scrap and match whatever increase it establishes for October shipments -- or, in other words, keep WFB base prices unchanged while applying the increased Raw Material Surcharge. Despite the existing gap between spot deals and list prices and the approach of the slower holiday months of November and December, domestic longs mills may be able to push through an October increase for WFB prices primarily due to the continued absence of import presence in the US market and also because US mills are still operating at a reduced rate (for example, one of SDI's beam rolling mills remains idled).
There are some WFB import offers out there; however, they are not very attractive. The most prevalent import offers of WFB have been from Europe, most notably from ArcelorMittal in Luxembourg, Germany and Spain. Traders have mentioned that offers over $31.00 cwt. ($683 /mt or $620 /nt) are not currently workable, and most recent European offers calculate to at least $32.00 cwt. ($705 /mt or $640 /nt) FOB loaded truck US ports.
Koreans have also been seen offering import WFB but their offers remain too high to be competitive with those of US mills, with most Korean offers coming to about $34.00 cwt. ($750 /mt or $680 /nt) FOB US West Coast ports and to around $35.00 cwt. ($772 /mt or $700 /nt) FOB US Gulf ports. All Mexican beam offers have also been rescinded. Taiwan, which has been an occasional supplier to the US market, is also absent from the offshore offers. Long import lead times, competitive domestic spot offers and overall market uncertainty will likely continue to keep import bookings scarce over at least the next month or two, with no substantial increase in volumes starting to appear until at least early next year.
According to license data from the US DOC, volumes of H-beams imported by the US remained low in June and July, decreasing approximately 31 percent from 6,480 mt in June to 4,458 mt in July. Tonnage from Luxembourg (origin of ArcelorMittal Europe's tons) decreased from 2,411 mt in June to 1,440 nt in July and Korean tonnage decreased from 3,103 mt in June to only 303 mt in July. However, imported H-beam tonnage from Germany increased in this period, from 40 mt in June, to 1,395 mt in July.