US merchant bar market – Lack of imports to improve domestic market

Monday, 19 November 2007 10:25:52 (GMT+3)   |  
       

Domestic merchant bar prices will continue to range at current levels for the remainder of 2007. But what will happen come January? 

For the New Year, buyers are predicting that business will improve slightly, mainly because imports have dried out. Perhaps mostly due to the weak dollar, the import competition that once was a threat for the domestic mills no longer exists in a big way. Import offers from all regions have gone up significantly, so there are not many takers in the US. With import prices very close to, if not above, the domestic price, US service centers are reorganizing, with plans to develop stronger relationships with domestic mills and to buy more domestic steel. 

Even if US demand for merchant bars does not grow significantly stronger in the upcoming months, the weak import competition alone is expected to give domestic mills more business, which may in fact raise domestic prices in the first quarter. The last merchant bar price increase issued by Nucor was in October, and it is possible that January might be the next. 

Steel service center inventories are at historically low levels. Also, rebars, which are produced in the same rolling mills with merchant bars, are showing signs of strengthening. Rebars will be competing for rolling time with merchant bars at these mills, making merchant bar supplies tighter.

Domestic merchant bar prices are currently ranging from $33.85 cwt. to $41.55 cwt. ($735 /mt to $905 /mt or $667 /nt to $821 /nt), depending on size, shape and thickness. The pricing trend is slightly up as the market is expected to grow stronger in the first quarter of next year. 

The import pricing trend is up, as offshore prices continue to rise along with freight rates. In Taiwan, not only are freight costs to the US an issue, but billet prices are increasing as well, upping mills' raw material costs. Both of these factors have pushed up merchant bar offering prices by $1.00 cwt. Offers from Taiwan are now ranging from $36.50 cwt. to $37.50 cwt. ($805 /mt to $828 /mt or $730 /nt to $750 /nt) duty paid, ex-dock at West Coast ports, with most items over the domestic prices.

Billet prices have stabilized in Turkey, although skyrocketing freight rates are still an issue. Along with high freight rates, there is a decreasing amount of ships to transport the tonnage to US ports. These factors have pushed up offering prices by $1.00 cwt. with offers now ranging from $38.50 cwt. to $39.50 cwt. ($849 /mt to $871 /mt or $770 /nt to $790 /nt) FOB loaded-truck, US Gulf ports. These offers are for mid-to-late first quarter arrivals, though some are being withdrawn completely due to the lack of ships. 

China, a major import source at one time, is now out of the US market for the most part. With all of the claims on Chinese tubing, buyers are hesitant to purchase any products from China. Another factor pushing China out of the market is the ever increasing export tax. Rumors are still developing regarding a percentage bump for Chinese merchant bars.  Currently the export tax on merchant bars is 10 percent, and the buzz is that come January 1st, 2008, the export tax will increase by another five percent, to a full 15 percent. If this rumor turns into a reality, this will push China even further out of the US market. As it is now, their offering prices are too high for consideration. 


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