The domestic merchant bar market has remained relatively stable despite recent mill price increases, while imports have slowed down in the past month.
While some merchant bar distributors tried to beef up their inventories before the mill's announced April 1 price hike takes effect, most are continuing to buy on an "as needed" basis, filling holes in their inventories but not buying beyond actual usage. As with other products with published price lists, merchant bar transaction prices are expected to fall in line with the price increases, without too much deviation from the list prices. The $2.50 cwt. ($55/mt or $50/nt) increase in the raw materials surcharge (RMS) from February has lifted the domestic merchant bar published prices into the range of $40.30 cwt. to $45.50 cwt. ($888/mt to $1,003/mt or $806/nt to $910/nt) ex-mill depending on size, shape and thickness.
Some merchant bar customers are wary of the price hikes, and believe that they represent the start of a mini-bubble that is likely to burst a few months down the road. However, because merchant bar production is significantly cut, and steel service center inventories are still low, the possibility of a sharp decrease is not likely for the next two to three months.
Despite the supply side restraints, end-use demand remains sluggish. Although the construction sector hasn't seen much spring seasonal activity quite yet, other industries that the merchant bar market serves, such as agricultural, have been seeing slight improvement. Daily shipments increased slightly in February, while inventory levels climbed. According to the latest monthly Metal Service Center Institute (MSCI) shipment and inventory report, daily shipments of bar products increased from 11,500 nt in January to 12,200 nt in February; however, total month-ending inventory also increased from 620,000 nt to 659,000 nt during January and February respectively. This is quite a different picture than a year ago, when daily shipments were about the same but the month-ending inventories for January and February were at the highest levels of 2009 (919,300 nt and 899,200 nt, respectively).
On the import side, many customers are only buying specialty sizes and products that are difficult to get domestically, such as small flats, strips, rounds and squares. Turkish merchant bars have been offered at $36.00 cwt. to $37.00 cwt. ($794/mt to $815/mt or $720/nt to $740/nt) FOB load truck at US Gulf ports, an increase of $2.00 cwt. ($44/mt or $40/nt) from last month. Also, some Turkish merchant bars are delivered to the East and West Coast via containers.
Overall, merchant bar imports quieted down a bit last month. According to the latest import license data from the US Import Monitoring and Analysis System (SIMA), merchant bar import permits decreased in February from January, at 6,274 mt and 7,777 mt respectively. Additionally, license data only show 2,784 mt of imports for March, and with less than two weeks left of the month, it is unlikely that final March levels will outpace February levels. Top importers of merchant bar to the US in February were Mexico (3,619 mt) and Canada (2,328 mt). This data is for light sections of carbon and alloy steel, U, I, L, T and H shapes of 3" or smaller (does not include rounds, squares, or flats).
