Scrap prices in January skyrocketed, but what happens in February will have a very strong impact on end-product markets such as merchant bars. While some buyers foresee future increases, others foresee stability.
Demand was not the driving factor for the most recent merchant bar price increase. Instead, domestic mills have watched raw material costs continually rise and have in turn hiked up their steel prices in order to keep up with the added input costs. After a huge January price increase for merchant bar products of $3.00 cwt. ($66 /mt or $60 /nt), buyers are curious to see what will happen in the remainder of the first quarter. While some buyers see no immediate end to domestic mills' price hikes, others say we have just seen the last major price increase for at least a little while. "Mills are at the max where pricing is concerned," according to one Gulf Coast buyer.
Since in the current market, the recent price increases are tied to scrap, not demand, everyone is wondering what will happen to the scrap market in the months to come. The general consensus between scrap dealers is that the market will stay more or less neutral in February, and no more rapid increases are to occur in the immediate future. Actually, instead of increases, the market may see some slight decreases come February, according to some US scrap brokers.
In light of the hefty January increase made by Nucor Steel for merchant bar products, if February shredded scrap prices do, in fact, remain at current levels, or if they fluctuate very slightly in either direction (up to $15 per long ton), it is likely that Nucor will keep merchant bar prices flat for March shipments.
For now, domestic merchant bar prices for February shipments range from $38.10 cwt. to $45.80 cwt. ($840 /mt to $1,010 /mt or $762 /nt to $916 /nt), depending on size, shape and thickness.
Merchant bar imports are still pretty scarce, especially on the West Coast. China is completely out of the US market, and Taiwan has slipped from the US market as well. Though Taiwanese offers used to be available on the West Coast at reasonable numbers, offers are off the charts these days as billet prices in Southeast Asia are rapidly increasing.
Turkey is still offering to the Gulf Coast, though billet prices in the Mediterranean region have been rising as well and are up significantly since our last report two weeks ago. Freight rates have come down slightly, but not enough to offset the cost of the obscene billet prices.
Offering prices from Turkey to the Gulf are up $3.00 cwt. ($66 /mt or $60 /nt) since our last report. Turkish offers now ranging from $43.50 cwt. to $44.50 cwt. ($959 /mt to $981 /mt or $870 /nt to $890 /nt) FOB loaded-truck, US Gulf ports, with little to no takers.
There are South American offers out there at reasonable numbers, but just like offers from every other source, these prices are headed north. SteelOrbis has learned that some Gulf Coast buyers have booked some material from the western region of South America at around $40.00 cwt. ($882 /mt or $800 /nt) for late second quarter deliveries. Those low numbers may not be available anymore as offering prices are set to increase; however, the new offering prices are still expected to be competitive compared to that of the other traditional import sources.