While it appears US wide flange beam (WFB) prices finally bottomed out last month, the continuing weak demand will most likely result in the market trending neutral over at least the next several weeks.
The persisting weak demand for most steel products can be attributed to the slumping economy and credit crisis. Specifically, the WFB market continues to suffer from faltering construction activity for the non-residential and industrial sectors.
According to the Metal Service Center Institute (MSCI) shipment and inventory report, even though overall inventories for structural products have been steadily shrinking, the slowdown in demand has resulted in drastically fewer daily shipments and inventories spending longer time in the warehouse. November 2008 structural product inventories at US service centers totaled about 872,000 nt, compared to 973,000 nt in October 2008 and over 1.1 million nt in November 2007. However, daily shipments for November 2008 totaled only 12,000 nt, compared to almost 14,000 nt in October 2008 and almost 19,000 nt in November 2007. Consequently, despite there being fewer total tons of inventory in November 2008, the amount still equated to about 3.8 months of inventory on hand. This compares to 3.1 months of inventory in October 2008 and only 2.9 months of inventory in November 2007.
The rolling schedule of leading American beams producer, Nucor-Yamato, also belies the weak WFB demand. Most sections are now produced about every three to four weeks, compared to every eight weeks during the course of the summer. The "controlled order entry" conditions have also all been completely lifted.
However, despite the lack of demand, Nucor-Yamato increased its wide flange beam (WFB) transaction prices beginning January 1 by $35 /nt ($1.75 cwt. or $39 /mt) as a result of its raw materials surcharge (RMS) for structural products rising by $70 /nt ($3.50 cwt. or $77 /mt). Base prices were reduced, but only by $35 /nt. As a result, domestic standard-sized beam (ASTM A992, W10 x 10, W18 x 6, W24 x 7) prices registered a net increase to a new level of $45.20 cwt. ($996 /mt or $904 /nt) FOB mill.
Moreover, US scrap prices may continue to climb, albeit at a slow pace. The national infrastructure rebuilding plan proposed by President-elect Obama is another bright spot for the US beams market. But for now, the credit crunch is preventing most new WFB-intensive projects from getting off the ground.
On the import side, activity is extremely quiet. And considering that most domestic mills are still operating at reduced production rates and are eager for business, any interesting import offer could most likely be beaten by an aggressive domestic offer with a quicker turnaround time, which is imperative in today's market conditions.
According to data from the US Import Administration, worldwide import tonnage of H-beams arriving in the US totaled almost 23,830 mt during the fourth quarter of 2008. The three largest importers during that time were: Luxembourg, at 10,487 mt; South Korea, at 3,182 mt; and Taiwan, at 2,766 mt.