Despite tepid purchasing activity and nearly full stocks, US beam mills are expected to raise prices after January scrap increases are announced.
With the US construction market not recovering as fast as many would like, domestic wide flange beam (WFB) mills are sitting on sizeable inventories. Service centers have also been saddled with inventory for a few months--according to the latest MSCI Metals Activity Report, month-ending inventories were 488,600 nt in November, still lower than the most months of 2010, but reflective of an upward trend (October levels were at 476,500 nt, and December totals are expected to be higher than November). Additionally, average inventory months on hand increased from 2.3 to 2.5 months in November, after being at a level of 2.3 months for four consecutive months. Monthly shipments from steel centers also dropped in November, to 195,800 nt from 210,900 nt in October.
Despite the inventory situation, mills are not exactly willing to absorb the imminent scrap hike (to be announced any day), which is now estimated to be around $75/long ton for shredded. According to SteelOrbis' sources, mills will probably be able to push through a raw materials-based price increase, mostly because demand for beams is not entirely dead, and buyers who actually need product will not have much choice but to follow along with the rising scrap trend that's affected every other product in the steel industry.
Until official announcements are released, WFB prices are still approximately $38.50 cwt. ($849/mt or $770/nt) ex-mill (for ASTM A992, W10 x 10, W18 x 6, and W24 x 7). If mills raise prices by at least $3.00 cwt. ($66/mt or $60/nt) as expected, that would lift prices up to $41.50 cwt.-plus ($915/mt or $830/nt) ex-mill. Another indicator that beam prices will trend up with scrap is the current situation with distributor prices. Throughout much of the last quarter of 2010, many distributors were routinely selling product at or below mill prices. In the last month, however, those same distributors have been offering beams at prices higher than mill offerings, which is likely the result of mills tightening their purse strings and declining to give out significant deals.
Another factor influencing mills' confidence in pushing through the upcoming price increase is the relative lack of competition from import sources. Offers from Korea have been quiet lately, and prices heard out of Europe, at $44.50 cwt. ($981/mt or $890/nt) duty-paid FOB load truck in East Coast ports, will be too high for serious consideration even after US prices increase.
Already, WFB imports into the US have been on a steady decline since October. According to import license data from the US Import Monitoring and Analysis System (SIMA), the US imported 9,411 mt of beams in December, down approximately 17 percent from November's level of 11,345 mt. Korea, Spain and Germany registered declines in beams shipped to the US in December, but despite the overall downtrend, imports from Luxembourg and South Africa surged. The US imported 4,889 mt of WFB from Luxembourg in December, compared to 1,646 mt in November; and South Africa shipped 1,302 mt in December, compared to a virtually nil 3 mt in November. According to recent order activity, however, it is unlikely that any increase in imports (general or country-specific) will be seen in near-future reports.