Shredded scrap prices have finally bottomed out and started to rebound, with prices now up approximately $5 per long ton from last month.
Following June's scrap increase, Nucor Bar Mill Group announced to customers that prices will remain stable for July merchant bar shipments. Nucor has increased its raw materials surcharge (RMS) for July by $5 /nt ($0.25 cwt. or $5.51 /mt) to $105 /nt ($5.25 cwt. or $116 /mt). Base prices for merchant bars will decrease by the same amount resulting in no net change in transaction prices for July shipments.
Domestic merchant bar transaction prices throughout July are in the range of $33.35 cwt. to $41.05 cwt. ($735 /mt to $905 /mt or $667 /nt to $821 /nt), depending on size, shape and thickness. Scrap prices are expected to remain relatively stable throughout the summer months, keeping the domestic merchant bar pricing trend flat as it is very unlikely prices will increase in August.
Adding to the reasoning behind the flat pricing trend is the market itself. It is very doubtful that merchant bar transaction prices will increase under the current market conditions. Things could be worse, but demand is pretty sluggish and commercial construction has shown signs of slowing down in recent weeks. That along with the continually weak housing market is making it more difficult for distributors to downsize their inventories. Market players had expected more strength for this time of year.
As for imports, in China the newly imposed export tax on billets has caused export prices to rise significantly. Other countries are looking elsewhere to buy billets, refusing to pay such a premium, resulting in a large excess in China's domestic market. This has caused China's domestic billet prices to drop approximately $10 /mt - $15 /mt. This cost decrease in raw materials is expected to offset part of the export tax cost on merchant bars from China. The export tax added an approximate $2.75 cwt. ($61 /mt or $55 /nt) onto mills costs, while the decrease in billet costs will take away an approximate $0.75 cwt. ($17 /mt or $15 /nt), still leaving the pricing trend strongly up.
Taiwanese mills have attempted to raise their asking prices, but there were not many takers, forcing them to push prices back to levels as of two weeks ago. Offerings from Taiwan are still in the range of $33.50 cwt. to $34.50 cwt. ($739 /mt to $761 /mt or $670 /nt to $690 /nt) FOB loaded-truck, at Gulf and West coast ports, though they are more dominant on the West Coast.
Billets in the Mediterranean region have continued to soften, pushing merchant bar offerings from Turkey down by $0.25 cwt. Turkish offers to the US are now in the range of $35.75 cwt. to $36.75 cwt. ($788 /mt to $ 810 /mt or $715 /nt to $735 /nt) FOB loaded-truck, US Gulf ports. The pricing trend in this region is slightly down and prices may slip a little further in the upcoming weeks.