US beam market sees first price decrease in years; will more follow?

As previously reported by SteelOrbis, US domestic wide flange beam (WFB) prices took a dive last week when industry leader, Nucor-Yamato Steel Company, dropped its WFB prices by $80 /nt across the board. 

With softening demand and falling shredded scrap numbers, domestic beam producer, Nucor, wasn’t left with much of a choice when making pricing level decisions effective for the remainder of October. Due to falling shredded scrap prices, Nucor lowered its raw materials surcharge (RMS) by $130 /nt ($6.50 cwt. or $143 /mt) from the company’s previously announced RMS. Nucor-Yamato then upped its base prices by $50 /nt ($2.50 cwt. or $55 /mt), which resulted in a net transaction price decrease of $80 /nt ($4.00 cwt. or $88 /mt). Announced in mid-October, this pricing decision took immediate effect, instead of what is typical from the company, having an effective date beginning the first day of the following month. 

Current prices for standard-sized beams (ASTM A992, W10 x 10, W18 x 6, W24 x 7) are at $53.60 cwt. ($1,182 /mt or $1,072 /nt) FOB mill for the remainder of October and through November. Considering the major financial crisis the US economy is experiencing, the price drop was modest and US prices are quite higher than international levels. 

In addition to falling raw material costs, demand for WFB has softened, though not nearly as significantly as that for other long products, such a rebar, or flat products. Residential construction has remained very slow over the last year or more and commercial construction has also slowed down considerably, demonstrating lower demand for WFB on both the fabricator and service center level. 

In the short term, it is not hard to determine the fate of the beam market, as although it’s one of the steel industry’s stronger products, this was the first price decrease to happen in years, and there is still a lot of room for correction. If shredded scrap takes another fall in early November, it could be reason enough to lower beam prices another notch, especially in a struggling market. 

Wide flange beam imports have been pretty scarce over the last few months, but global credit crises are now a threat to many of the big construction projects, which usually consume a lot of beams. Many international beam producers may begin to find themselves without orders. This coupled with the stronger US dollar could lead to some foreign producers becoming motivated sellers in the North American market. 

According to data from the US Import Administration, worldwide export tonnage of H-beams to the US totaled 8,245 mt, 11,131 mt, and 1,773 mt in August, September and October 2008 respectively, (though October data is only collected through October 15, 2008). In comparison, data from 2007 showed August with 27,401 mt, September with 17,957 mt and October with 18,858 mt. 

Although in recent months imports have been minimal, market conditions for attractive offerings to the US are better now. But because domestic prices are strongly trending downwards, usual import buyers will choose to wait and not buy with delivery lead times stretched out three to four months in the future.