US merchant bar market – Higher prices drive buying activity

The US merchant bar market is continuing to grow stronger as demand is picking up and prices are rising. As was expected, Nucor has increased domestic merchant bar prices for March shipments. Announced to customers earlier this month, Nucor upped transaction prices for merchant bars by $1.50 cwt. ($30 /nt or $33 /mt). Effective March 1st, 2007 Nucor's RMS will be $6.65 cwt. ($133 /nt or $147 /mt), a $2.00 cwt. ($40 /nt or $44 /mt) increase from February's RMS. Nucor lowered base prices by $0.50 cwt. ($10 /nt or $11 /mt), resulting in the $1.50 cwt. ($30 /nt or $33 /mt) price increase overall. March merchant bar prices will range from $31.85 cwt. (e.g. 2 x 2 x ¼ angles) to $39.55 cwt. ($702 /mt to $872 /mt or $637 /nt to $791 /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. The merchant bar market overall is very strong right now. Not only are the non-residential and industrial construction markets still robust, in some parts of the country the residential housing market is starting to pick up also. Builders are in the beginning stages of planning new housing developments, and construction is expected to continue at a steady pace throughout the second quarter. Along with the strong construction market, the recent increase in domestic prices has helped to boost buying activity as well. Buyers are more anxious to replenish their inventories now, hoping to make quick, intelligent purchasing decisions before another price hike occurs. SteelOrbis has even heard that there are shortages of certain sizes of merchant bars. The shortages are mainly occurring for unusual sizes that not as many service centers stock. Still, for the past few months, while the market was not as strong, there has been an excess of stock at service centers, never a shortage. Along those same lines, lead times are increasing as well. The time it takes from order to delivery almost seemed to be too fast a couple months ago, whereas now, buyers are forced to wait for their product. The domestic scrap market is still looking very strong, and it is expected that prices will go up again in the near future. Following the scrap trend, market players also believe domestic merchant bar prices will increase again for April and possibly May shipments. Chinese mills are now on holiday in celebration of the Chinese New Year, leaving the steel market very quiet this week. Billet prices are still on the rise in Asia, which will most likely increase merchant bar prices next week. Another issue is the Value Added Tax (VAT) rebate. Although nothing has been officially announced yet, there is still a possibility for a decrease in the Chinese VAT rebate which would lead to a significant increase in merchant bar prices from this country. Traders are having difficulties negotiating between the US buyers and Chinese mills as the mills are hesitant to make a commitment until an announcement is made regarding the VAT rebate. With a quiet holiday week in China, merchant bar offers have remained the same since our report two weeks ago, still 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. Taiwanese offerings have also remained the same since our last report, still 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. As the cost of billets continue to increase, Turkey has upped their merchant bar offers by $0.50 cwt. again. Offerings now range from $35.00 cwt. to $36.00 cwt. ($772 /mt to $794 /mt or $700 /nt to $720 /nt) FOB loaded-truck, US Gulf ports. The pricing trend for imported merchant bars is up.