As soft demand persisted and raw material costs continued to fall, domestic merchant bar mills dropped their prices by $80 /nt in mid-October, and buyers say there are more price decreases to follow.
After Nucor announced its most recent price decrease, which lowered merchant bar transaction prices by $80 /nt ($4.00 cwt. or $88 /mt), shredded scrap prices continued to slide further as the month went on. Currently, shredded scrap numbers are down a total of $45 /long ton (lt) since Nucor announced its October 13, 2008 raw materials surcharge (RMS) of $83 /nt ($4.15 cwt. or $91 /mt), which already represented a $130 /lt drop in shredded scrap prices. On top of the $45 /lt by which scrap has declined since mid-October, more decreases may follow come early November. Although the scrap market is said to be close to the bottom, it's not there just yet.
With demand being so weak and more scrap decreases anticipated, it is likely that the US long products leader, Nucor, will drop prices another notch come November. The question is: by how much? At this point, it seems that mills can afford to go much lower with their price, and even if they couldn't, they may not have much of a choice. Buyers are waiting to make purchases, leaving mill business pretty slow. Demand from an end-user standpoint is weak, and raw material costs have fallen drastically over the last few months, yet domestic mills have only dropped their prices slightly in comparison, leading most market players to believe that prices will come down further.
Especially negatively affected by the falling prices are the steel service centers. Mills are experiencing lower input costs and need the business, and end-users are happy to get a price break, while steel service centers are seeing their inventories devalue for every price decrease.
Current domestic merchant bar prices are ranging from $45.70 cwt. to $53.40 cwt. ($1,008 /mt to $1,177 /mt or $914 /nt to $1,068 /nt) depending on size, shape, and thickness; however, the pricing trend is down as more depreciation is expected.
With the global economy in crisis and foreign steel markets weakening faster than the US market, more import offers have been appearing at attractive numbers, though there are few takers. Mexico is shipping merchant bar products to the US at numbers a few dollars below domestics. Other countries, like Turkey, are trying to get back into the US market as well. However, with such long lead times and deliveries not scheduled until February or March of next year, many buyers are not taking advantage of these lower-priced import offers, and are instead only buying domestics, if at all.
Import offerings from Turkish mills can now be found in the range of $40.00 cwt. to $41.00 cwt. ($882 /mt to $904 /mt or $800 /nt to $820 /nt) FOB loaded truck, US Gulf ports.
Data from the US Import Administration show that merchant bar import arrivals have been on a decline over the course of the last few months. In June 2008, worldwide import tonnage to the US for merchant bar products totaled 15,978 mt. Since then, merchant bar import totals have slid by at least 1,000 mt every month, demonstrating the following monthly totals: July - 14,973 mt; August - 11,293 mt; September - 9,647 mt; and October - 6,387 mt (using June through September Census Data, October License Data collected through October 28, 2008). 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).