Along with the rest of the US long products market, merchant bar buyers are eyeing the latest scrap prices closely to predict the direction of merchant bar pricing. With the domestic scrap market trending downwards and auto bundle sales plummeting earlier this week, it is expected that merchant bar prices are likely to take another fall.
Auto bundle prices fell by nearly $80 /ton this week, and experts predict scrap prices will follow and drop by approximately half that number. After a $40 /long ton decrease in shredded scrap prices in April, market players were hoping the decrease wouldn't be as significant this coming month. However, after speaking with various scrap yards, the opinion seems to be a pessimistic one, as most are in agreement that scrap prices will slide again for May, by at least $30 to $40 /long ton.
With that being said, insiders are anticipating a smaller decrease in merchant bar prices for mid-May or June arrivals. With the cost of raw materials continually falling, merchant bar mills are expected to lower prices. As scrap prices dropped last month, Nucor Bar Mill Group lowered transaction prices for merchant bars by $1.25 cwt. ($27.56 /mt or $25 /nt) for May. If scrap prices do fall the expected $40 /long ton, market sources believe that domestic merchant bar mills will follow the trend and lower prices by at least another $20 /nt ($1.00 cwt. or $22 /mt). If for some reason scrap prices beat the odds and fall only slightly (less than $20 /long ton), merchant bar prices will most likely remain stable.
Currently, merchant bar (e.g. 2 x 2 x ¼ angles) prices range from $33.35 cwt. to $41.05 cwt. ($735 /mt to $905 /mt or $667 /nt to $821 /nt), depending on size, shape, and thickness. The domestic pricing trend is slightly down, however, as merchant bar prices are expected to follow the scrap price trend for now.
The other part of the equation, merchant bar demand, is not quite as strong as producers were hoping for it to be this time of year. For larger structural sizes, consumption is decently strong thanks to the industrial and non-residential construction markets that have maintained their strength for many months now. The smaller sizes, however, are in a bit of a slump, most likely due to the very sluggish housing market.
As for the import market, billets in the Black Sea region have finally begun to decrease due to the lower scrap prices. This in turn has put Turkish merchant bars back on the map, reducing prices by $1.00 cwt. ($22 /mt or $20 /nt). Offers are still very high, but they are slightly more competitive than offers a month ago. Merchant bar offerings from Turkey have seen their peak, and prices are expected to continue to come down slowly.
Merchant bar offerings from Turkey are now ranging from $37.00 cwt. to $38.00 cwt. ($816 /mt to $838 /mt or $740 /nt to $760 /nt) FOB loaded-truck, US Gulf ports.
Taiwanese offerings have remained unchanged since our last report two weeks ago. Asian billet prices have increased in the last few weeks, keeping merchant bar prices relatively stable. The pricing trend for this region is neutral. Prices are not expected to go up anytime soon, despite the modest billet price increases.
Taiwanese offerings are in the range of $33.00 cwt. to $34.00 cwt. ($728 /mt to $750 /mt or $660 /nt to $680 /nt) FOB loaded-truck, at Gulf and West Coast ports, though they are more dominant on the West Coast.
China abolished the VAT rebate for merchant bar products as well. This added approximately $50 /nt ($2.50 cwt.) to the current cost of merchant bar exports out of China. Primarily for this reason, as well as due to billet price increases, Chinese merchant bars are offered at a range of $34.00 to $35.50 cwt. ($750 /mt to $783 /mt or $680 /nt to $710 /nt), an increase of $1.50 cwt. ($33 /mt or $30 /nt) since our last report two weeks ago. Now slightly more expensive than Taiwanese bars, Chinese supply is also notoriously unreliable. However, there is still a decent gap between the domestic prices and the Chinese levels, and so the buying activity continues.