Since US merchant bar mills began increasing domestic prices in mid-May, buyers had managed to negotiate spot offers for well below list prices. However, after mills this week announced prices will remain unchanged for September deliveries, it appears that spot offers are firming up and growing closer to the list prices.
Published merchant bar transaction prices are currently within the range of $36.05 cwt. to $41.25 cwt. ($795 /mt to $909 /mt or $721 /nt to $825 /nt) ex-mill depending on size, shape and thickness. This range was established last month after domestic mills announced a $2.00 cwt. ($44 /mt or $40 /nt) August price increase. At that time there was much speculation about the foundation of the merchant bar market and whether the increase would just create a larger gap between spot offers and list prices. But while there may still be some deals to be had here and there at the mill level, buyers have not been able to achieve discounts of $2.00 cwt. and higher like they previously had.
Overall demand remains depressed and domestic mills continue to running at only around 50 percent capacity; however, the de-stocking phase appears to have ended, while inventory shipments and levels are slowly improving. According to the latest Metal Service Center Institute (MSCI) shipment and inventory report, daily and monthly shipments of structural steel increased from May to June, from 10,800 nt to 10,900 nt, and from 216,000 nt to 239,000 nt respectively. Meanwhile, monthly inventories decreased from 553,000 nt in May to 529,000 nt in June, and the average monthly inventory overhang also decreased from an estimated 2.6 months in May to only 2.2 months in June, their lowest level in over two years.
Looking forward, now that spot offers have begun firming up, most distributors believe that US merchant bar prices will remain relatively stable through the remainder of the year, especially if import offers remain quiet.
While the frequency of import offers has slightly increased over the past month, bookings have remained quiet, even though most import offers are significantly lower-priced than US domestic. Mexico continues to be the most competitive foreign source offering merchant bars to the US, with rates as low as $29.00 cwt. ($639 /mt or $580 /nt) delivered to Texas. Mexican offers delivered to theUS West Coast are at a higher premium, at around $31.00 cwt. to $32.00 cwt. ($683 /mt to $705 /mt or $620 to $640 / nt).
Meanwhile, Turkish merchant bar import offers remain too high-priced on most products for buyers to consider. One trader informed SteelOrbis that a Turkish import merchant bar offer recently increased by $3.00 cwt. ($66 /mt or $60 /nt) within a matter of days, and most offers are hovering in the high $30s cwt. Turkish import offers may also become less active in the coming weeks as Ramadan starts next weekend (extending from August 22 through September 20). However, in the meantime traders have informed SteelOrbis that they are able to still get some attractive, small, containerized orders on niche items such as small rounds, angles and flats booked from Turkey.
According to data from the US Steel Import Monitoring and Analysis System (SIMA), total monthly merchant bar imports nearly doubled in July over June, though still remaining under the 2008 monthly average of 11,900 mt. Merchant bar imports increased from 5,676 mt (based on June census data) to 10,545 mt (July licenses). The top three exporters of merchant bar tonnage to the US during July were Turkey, at 4,073 mt; Mexico, at 3,105 mt; and Canada, at 3,065 mt. These were all significant increases from June, when Turkish imports totaled 275 mt, Mexico's imports were 2,465 mt and Canada's imports totaled 1,962 mt. The reported 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).