Prices for merchant bar, which has been hailed as a "bright spot" in the US longs market, have decreased on the heels of shredded scrap's downtrend.
As of last month, merchant bar was one of the most active and profitable longs product in the US domestic market, and mills found little resistance getting full asking prices from their customers. However, Nucor announced late Tuesday a $1.00 cwt. ($22/mt or $20/nt) decrease in June transaction prices for merchant bar, following a similar drop in shredded scrap pricing. For June shipments, US domestic merchant bar prices will range from $44.30-$49.50 cwt. ($977-$1,091/mt or $886-$990/nt) ex-mill, depending on size and shape.
While it is too early to fully comprehend Nucor's surprising move (which other major US mills will surely follow), some point to hints last month that US merchant bar mills were paying more attention to import prices. Sources tell SteelOrbis that mills were becoming a bit flexible with pricing in reaction to attractively-priced imports, but they still didn't expect any movement in transaction pricing if shredded scrap only went down $20/lt. Apparently, demand was strong enough to keep prices afloat.
Now, however, the strength of merchant bar demand is being called into question, especially considering that import prices are rising. Current offers from Turkey are now in the range of $40.00-$43.00 cwt. ($882-$948/mt or $800-$860/nt) duty-paid FOB load truck at US Gulf ports, reflecting a $1.00 cwt. increase from last month. With US prices going down and imports going up, there's a very good chance that US buyers will reduce their import inquiries for a while, but not entirely, since the margin between domestics and imports is still rather wide.
As for merchant bar imports currently flowing into the US, shipments are on a slight downtrend, but early numbers can be deceiving. By mid-April, the US had only imported 1,849 mt of merchant bar, according to license data from the US Steel Import Monitoring and Analysis System (SIMA), but by the end of the month, levels jumped to 7,067 mt (compared to 9,233 mt in March). Therefore, even though data as of May 11 only show 1,398 mt of merchant bar arriving in the US, the levels could change in the next couple weeks. As for merchant bar sources, Turkey--which is traditionally the third-largest source of imported merchant bar in the US--is edging out Canada as the number two source in May. So far this month, Turkey has sent 440 mt of merchant bar to the US, compared to 420 mt from Canada. And Mexico, which is typically the number two source, has taken the top spot with 500 mt. Of course, the rankings could very well change by the end of the month, but one thing is almost certain--by June, tonnage levels from Turkey are expected to rise, based on increased import inquiries in March and April, possibly putting Turkey in the top spot.
