Strong demand, solid prices and slowly increasing production levels point to merchant bar as the most dependable product in the US longs market.
It came as no surprise that US domestic mills kept merchant bar prices level for August shipments--the announcement late Tuesday reflected the neutral domestic scrap market, but unlike other long products that are still struggling to reach July increase prices, US mills are not encountering any resistance to merchant bar asking prices in the range of $45.30-$50.50 cwt. ($999-$1,113/mt or $906-$1,010/nt) ex-mill, depending on size and shape. In fact, profit margins have been so healthy lately, multi-product mills have been increasing merchant bar's share of the production schedule, cutting into less-profitable products like rebar.
Strong end-use demand is driving merchant bar's current price stability, with US manufacturing in particular leading the way. The Institute of Supply Management's Purchasing Managers Index increased in June by 1.8 percentage points from May, denoting an expansion in the manufacturing sector for the 23rd consecutive month. Additionally, news orders and production increased month-on-month, and manufacturing employment increased by 1.7 percentage points to 59.9 percent. Other related sectors, such as agriculture and energy, are likewise improving, giving merchant bar an edge over other long products that don't have as diverse a range of end-uses.
Improvement in merchant bar demand is also indicated in service center shipments and inventories. According to the latest MSCI Metals Activity Report, monthly shipments increased from April to May, from 304,100 nt to 309,700 nt, reflecting slow but steady growth that sources say has continued through June and likely through July.
As for imports, inquiry activity is decent; but as imports remain a "niche" option for US buyers--which make import decisions based on inventory rather than prices--import levels are not having much effect either way on the domestic market. Prices from Turkey had some movement over the course of the last month, increasing and then decreasing back to where they were before: $42.00-$44.00 cwt. ($926-$970/mt or $840-$880/nt) DDP load truck at US Gulf ports, the same prices reported last month.
Currently arriving imports aren't making much of a splash either. While June merchant bar arrivals registered a healthy improvement over May (9,696 mt versus 6,916 mt), imports this month (as of July 12) have only reached 1,267 mt, according to the license data from US Steel Import Monitoring and Analysis System (SIMA). Canada and Mexico dominated the import field in June (5,714 mt and 2,613 mt, respectively), but this month, Mexico is taking the lead with 959 mt compared to Canada's 297 mt. Turkey, which traditionally holds the number three spot, has not registered any merchant bar to the US in July, while in June the country only supplied 1,130 mt.