Mills announced an immediate price increase ahead of the scrap announcement, and more increases are likely on the way.
Demand for merchant bar in the US is not spectacular, but a modest pick-up has bolstered domestic mills' decision to increase base prices for merchant bar immediately, before the official scrap numbers have come out. Sources have indicated to SteelOrbis that mills will have no trouble getting the $1.00 cwt. ($22/mt or $20/nt) increase announced December 2, and the additional $1.00 cwt. increase in the raw material surcharge (RMS), expected to be announced within a week, will also pass through without a hitch. In fact, mills will likely have to make adjustments to larger customers that are used to significant discounts, including large distributors that have been turning around and selling at or below mill pricing. Until then, prices for domestic merchant bar are now in the range of $39.80-$45.00 cwt. ($877-$992/mt or $796-$900/nt) ex-mill, depending on size and shape.
Partially explaining the aforementioned modest pick-up in demand is purchasing activity from service centers, which have had low inventories lately. According to the latest MSCI Metals Activity Report, month-ending inventories for merchant bar, at 737,900 nt in October, declined about 3.5 percent from September. Inventories will probably remain low in November MSCI results, but December data will likely show an increase based on replenishments. Additionally, monthly shipments from service centers also dropped month-on-month, but not as much as inventories--October's shipment total of 279,200 nt only represented a 2.5 percent decrease from the month prior. However, the shipment figure is still above 2010's average level of 271,400 nt.
While the import market for merchant bar is not typically strong, shipments trickling in over the last month could potentially lower the MSCI shipment numbers even further in November, unless demand picks up measurably. According to license data from the US Import Monitoring and Analysis System (SIMA), the US imported 6,211 mt of merchant bar in November, slightly up from October's level of 5,170 mt (preliminary census data). And while imports from Canada and Mexico increased, imports from Turkey nearly halved, with 247 mt imported in the US in November compared to 428 mt in October. This could be an indication that while US buyers are interested in venturing beyond domestics, they don't want to venture too far-such as overseas.
As for import prices, Turkish offers have gone up in the last month by about $1.00 cwt., bringing offers into the range of $39.00-$40.00 cwt. ($860-$882/mt or $780-$800/nt) FOB load truck at US Gulf ports for small sections and some structural channels and angles according to ASTM A36/A6. Once US prices increase again after the scrap announcement, the spread between domestics and imports will widen a bit more, which could encourage US buyers to take the overseas gamble and import from Turkey.
