As SteelOrbis forecasted in its last US merchant bar analysis on August 11, domestic merchant bar mills dropped transaction prices by $30 /nt, and another decrease could follow as scrap prices are trending down again.
Early last week, Nucor Bar Mill Group announced to customers that, effective with August 13, 2008 shipments, its raw materials surcharge (RMS) applicable to merchant bars would be $384 /nt ($19.20 cwt. or $423 /mt), a decrease of $59 /nt ($2.95 cwt. or $65 /mt) from its August 1 surcharge. In addition, the company increased its base prices by $29 /nt ($1.45 cwt. or $32 /mt), resulting in a net decrease of $30 /nt ($1.50 cwt. or $33 /mt) for transaction prices for the remainder of August and through September shipments.
Domestic merchant bar prices are now ranging from $52.20 cwt. to $59.90 cwt. ($1,151 /mt to $1,321 /mt or $1,044 /nt to $1,198 /nt) depending on size, shape, and thickness. The pricing trend is slightly down.
Merchant bar buyers had suspected a price decrease was on its way, as demand was showing signs of weakness and shredded scrap prices were trending downwards.
The recent price decrease implemented by domestic mills was the first for this year and, according to buyers, prices may continue on a slight decline going forward. Shredded scrap is not expected to rebound just yet. September is expected to bring another decrease, in the vicinity of $40 /lt to $60 /lt. If scrap prices fall this substantially, domestic mills may lower their prices again. With demand faltering, there is nothing to keep prices up if raw material costs go down.
So far this year, domestic merchant bar mills pushed through a number of price increases; so some leveling off might be in order. To recap, the increases have been as follows: increased by $25 /nt for January shipments, $60 /nt for February, remained stable for March, increased by $25 for April, $147 /nt for May shipments, $40 /nt for June, $35 /nt for July, and $65 /nt for August 1 shipments. Finally in mid-August, buyers got a small break with mills lowering transaction prices by $30 /nt.
In addition to slowing demand and lower raw material costs, domestic mills want to remain competitive with offshore offers. Though import offers are still not quite attractive enough to buy just yet, prices have been decreasing on a global scale, and soon, the prices may start to peak buyers' interest.
Turkish merchant bar offers have fallen approximately $4.00 cwt. ($88 /mt or $80 /nt) in the last two weeks due to the decreasing billet prices in that region, although this offering level is still not getting much traction in the US. Offers from Turkey are now in the range of $61.00 cwt. to $63.00 cwt. ($1,345 /mt to $1,389 /mt or $1,220 /nt to $1,260 /nt) FOB loaded truck Gulf Coast ports.
There has also been talk of merchant bar offerings from Taiwan and Mexico to the US with numbers comparable to or slightly lower than US domestic prices.