Still reeling from the prolonged slump in construction activity for the non-residential and industrial sectors, the US wide flange beam (WFB) market was hoping to get some relief this month; however, decreasing scrap prices and weak sales activity failed to provide any comfort.
In fact, many professionals dealing with the WFB market are about to get a lot more uncomfortable as prices are expected to decrease again over the next week. Furthermore, construction has been the Achilles heel for the WFB market, and many projects have been postponed or canceled over the past several months due to the credit and economic crises.
According to the Metal Service Center Institute (MSCI) shipment and inventory report, total domestic service center inventory for structural products was approximately 777,000 nt in December 2008, which was the lowest level in over two years; however, the amount of inventory on-hand still equated to about 3.3 months, which was the second highest monthly level in 2008. December daily shipments also totaled about 10,800 nt, which is the lowest shipment level in over two years.
Despite the weak sales, beam transaction prices actually increased in December by $35 /nt ($1.75 cwt. or $39 /mt) as a result of a raw materials surcharge (RMS) increase and remained neutral last month.
Nonetheless, US shredded scrap prices are down by about $30 /lt this month, which will effectively drop domestic transaction prices down by at least $1.50 cwt. ($33 /mt or $30 /nt), depending on how much the mills adjust base prices, within the next week. For now, domestic standard-sized beam (ASTM A992, W10 x 10, W18 x 6, W24 x 7) prices remain at $45.20 cwt. ($996 /mt or $904 /nt) FOB mill. Many traders believe that the new transaction price will be even lower than a net $1.50 cwt. ($33 /mt or $30 /nt) decrease, mostly due to the fact that US mills want to stay competitive with import offers.
On the import side, while activity remains quiet as well, there have been a few European offers rumored to be around $35.00 cwt. ($772 /mt or $700 /nt) duty-paid, FOB loaded truck in US Gulf ports. However, most US mills have made it a mission not to get beat by any import offers in this market, and while this may not correlate to a $10.00 cwt. ($220 /mt or $200 /nt) decrease from current transaction levels on the domestic side, it could make domestic price negotiations more viable.
According to data from the US Import Administration, worldwide import tonnage of H-beams arriving in the US totaled over 43,300 mt in January, which is almost twice as much tonnage as was imported to the US in the entire fourth quarter 2008, at 23,830 mt. The three largest importers in January were: Taiwan, at 18,280 mt; South Korea, at 15,238 mt; and Luxembourg, at 4,010 mt.