Domestic US merchant bar spot prices have bucked the downward trend that dominated the market going into May, and have trended sideways over the past couple weeks. Meanwhile, published prices actually increased. However, some distributors are not convinced that the merchant bar market is showing enough strength to register a price increase.
Nucor raised its published merchant bar transaction prices by $20 /nt ($1.00 cwt. or $22 /mt) last week, bringing the new listed range to $34.05 cwt. to $39.25 cwt. ($751 /mt to $865 /mt or $681 /nt to $7685 /nt) ex-mill depending on size, shape and thickness. The move came after Nucor’s competitor Gerdau Ameristeel made a price increase announcement of $40 /nt ($2.00 cwt. or $44 /mt) for June. Normally, Gerdau Ameristeel is a follower in pricing moves but this time it seems that the company wanted to give Nucor a clear signal that it would match any price increase announced by Nucor. In turn, Nucor also went up with the price, but only by half of the amount of Gerdau Ameristeel’s increase, perhaps to dictate to the market that it are still the leader in pricing decisions. Accordingly, being the smaller player in the market, Gerdau Ameristeel will have to roll back its price increase to match Nucor’s increase.
To achieve the net transaction price hike of $20 /nt, Nucor raised its raw materials surcharge (RMS) by $43 /nt ($2.15 cwt. or $47 /mt), and reduced merchant bar base prices by $23 /nt ($1.15 cwt. or $25 /mt).
As a result of the domestic increase, spot prices for most US domestic merchant bar products may start to firm up. While many special deals are still conducted at prices that are significantly lower than listed prices, the $26.00 cwt. ($573 /mt or $520 /nt) angles that were being offered to big players on significant orders a couple weeks ago may be much tougher to come by now.
But despite the official price increase, merchant bar demand remains lethargic and will not be able to support any major potential price hikes until demand improves. Distributors continue to hope that low inventories will eventually play a key role in price recovery once demand improves, but everyone has been waiting for that to happen since the beginning of the year, with no luck yet. According to the latest Metal Service Center Institute (MSCI) shipment and inventory report, despite service center steel bar inventories decreasing further from 852,000 nt in March to 835,000 nt in April, the average inventory overhang in April remained neutral from March at 3.7 months. April monthly and daily shipments were also down from March.
With demand remaining weak, domestic mills still want to remain competitive with imports and have thus far been successful in not losing any business to imports. There are few, if any aggressive import deals to the US for merchant bars, as many foreign sources are experiencing better domestic demand than the US and have filled orders heading into July, whereas domestic US mills are still searching for June orders.
Mexico remains the most competitive foreign source offering merchant bars to the US, with the most competitive offers still hovering at around $26.00 cwt. ($573 /mt or $520 /nt), delivered to California and Texas. These aggressive offers are generally only for big orders, while smaller customers are getting prices closer to the domestic range.
Meanwhile, Turkish and new Chinese offers can still been seen sporadically but traders have informed SteelOrbis that these offers are priced too high and just don’t make sense right now. The only interest traders may have in overseas product right now would be for niche items, and thus trading remains very light for merchant bars.
License Data from the US Steel Import Monitoring and Analysis System (SIMA) show that out of the total 5,281 mt of merchant bar imports in April, Canada accounted for the most tons, at 3,388 mt. Turkey, Mexico and Taiwan were the three next highest merchant bar import sources for the US, but with only 569 mt, 493 mt and 421 mt, respectively. The reported 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).