US scrap prices are trending upwards again, and by the time industry execs return to work after the holiday weekend, the magnitude of the increase should be clearer, helping to paint a better picture of what merchant bar mills will have in store for their customers for August production.
According to market sources, shredded scrap prices are said to be heading upwards, with prices up as much as $35 /lt to $40 /lt from June levels. With scrap prices on the rise, there is no doubt that US long product industry leader, Nucor, will up its transaction price for merchant bar products. The question is: By how much?
Granted, demand isn't stellar, but supply is reasonably tight due to the lack of imports. Also, international levels for merchant bar products are decently higher than the US domestic price. This dynamic allows domestic mills to have control over the market. Even if mills raise prices by $40 /nt ($2.00 cwt. or $44 /mt), domestic merchant bar prices will still be a bargain compared to their international counterparts. So, if shredded scrap finishes off with an increase of $40 /lt for July, domestic mills may push transaction prices up by the same amount, if not more, as they have a long way to catch up with international levels.
Also, the latest merchant bar price increase made by domestic mills (for July orders) was not too hefty ($35 /nt), so domestic mills can afford to push prices up one more time to end the summer.
Currently, domestic merchant bar prices are ranging from $50.45 cwt. to $58.15 cwt. ($1,112 /mt to $1,282 /mt or $1,009 /nt to $1,163 /nt) depending on size, shape, and thickness. The domestic pricing trend is strongly up though, as prices are expected to climb in August. Some industry execs are hinting at an increase of as much as $60 /nt ($3.00 cwt. or $66 /mt) for August orders.
On the import side, most countries have pulled away from offering to the US market for two reasons: they know their numbers are too high for the US market to accept, and other markets, such as the Middle East, will gladly pay the price.
Right now, if there were any import offers being booked, Turkish material would be nearly $20.00 cwt. ($441 /mt or $400 /nt) higher than US domestic prices, at a range $72.00 cwt. to $74.00 cwt. ($1,587 /mt to $1,631 /mt or $1,440 /nt to $1,480 /nt) FOB loaded truck, US Gulf ports. For some sizes that domestic mills do not produce, however, those high numbers may be buyers' only option. Other countries such as Peru, Chili, and Mexico that also produce those smaller sizes have not been offering lately, as the export advantage is not there. The US dollar is weak, and those countries are also experiencing a booming home market.
With this large difference between the US and international prices, it is no wonder that a lot of US merchant bar offers are currently circulated in Central America and the Caribbean. Traders are trying to find some consolation in exports to make up for their ever-disappearing import market.