US merchant bar market – Another domestic price increase expected

As raw material costs continue to rise, it is believed that another price hike will occur for merchant bars within the next couple of weeks. Announced to customers in January, Nucor upped merchant bar prices for February shipments by $15 /nt, in line with the trend of the shredded scrap market. Since last month, scrap prices went up continuously, nearly $40 /long ton. Market players now strongly believe that domestic merchant bar prices will increase again, but doubt that the full $40 /ton increase will be passed on. Nucor traditionally wants to avoid large fluctuations in pricing, so it is likely that in this case transaction prices may only increase a fraction of the scrap surcharge increase. Buyers in general think the net increase will be no less than $20 /nt ($22 /mt or $1.00 cwt.) For now, current domestic merchant bar prices still range from $30.35 cwt. (e.g. 2 x 2 x ¼ angles) to $38.05 cwt. ($669 /mt to $838 /mt or $607 /nt to $769 /nt), depending on size, shape, and thickness. Even though this is a wide range, most domestic merchant bar prices tend towards the lower end of the spectrum. For this time of year, the merchant bar market is relatively strong. Demand is decent, largely due to the non-residential construction market. Although many parts of the US are currently covered in snow, the warmer states have been continuing to build schools, shopping centers, etc., helping to boost demand for many steel products. Service centers have said that their inventories are pretty average and are in line with usage. One East Coast distributor commented that larger sized angles are hard to come by, where smaller bar products such as 4” angles are readily available. Scrap prices are going strong and will prevent any price decrease from occurring within the next three months. Buyers are now in full purchasing mode. As billet prices continue to steadily rise in Asia and elsewhere, import merchant bar prices have been going up as well. Some US buyers said they are seeing a minimal amount of imports coming in since the prices are relatively high right now. One Texas buyer stated, “It seems the prices are too high to make the commitment of ordering so far in advance.” With the increase in the cost of billets, Turkey upped their merchant bar offers by $0.50 cwt. Offerings now range from $34.50 cwt. to $35.50 cwt. ($760 /mt to $783 /mt or $690 /nt to $710 /nt) FOB loaded-truck, US Gulf ports. Due to the possibility of a decrease in the Chinese VAT rebate, merchant bar offers have gone up approximately $2.00 cwt. ($44 /mt or $40 nt) since our last report and are now in the range of $31.00 cwt. to $32.50 cwt. ($683 /mt to $717 /mt or $620 /nt to $650) FOB loaded-truck, at Gulf and West Coast ports. Merchant bar offers from Taiwan have increased by $1.50 cwt. ($33 /mt or $30 /nt) since our last report and are now ranging from $31.00 cwt. to $32.00 cwt. ($683 /mt to $705 /mt or $620 /nt to $640 /nt) FOB loaded-truck, at Gulf and West Coast ports, but are more dominant on the West Coast. According to census data released by the United States Import Administration, for the two year span from January 2005 to January 2007, monthly light shapes and bar exports to the US on average totaled 23,100 mt. January 2006 and January 2007 numbers both totaled 23,400 metric tons, coming in above average. The 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).