Although demand for merchant bars in the US is not as high as market players expected for this time of year, the market is decent and domestic prices are stable.
The non-residential and industrial construction markets have been showing signs of weakness in recent weeks, but the markets are still doing pretty well when compared to the years before 2004. Following the span of a few years for new housing developments, non-residential construction projects are still in progress in an effort to complete community building plans. Larger sizes are in decent demand because of these building projects, where smaller sizes, which are more used in residential construction, are much weaker as the housing market is sluggish. Market sources predict a possible turnaround in the housing construction market in the second quarter of next year at best.
The domestic scrap market is predicted to remain sideways throughout September, a trend which so far has been keeping merchant bar prices flat. As we head into August, it is expected that merchant bar prices will remain stable. Current domestic merchant bar transaction prices are ranging from $33.35 cwt. to $41.05 cwt. ($735 /mt to $905 /mt or $667 /nt to $821 /nt), depending on size, shape and thickness.
In other domestic news, to keep up with the consolidation craze in the steel industry, Gerdau Ameristeel Corp. purchased structural steel maker Chaparral Steel Co. for $4.2 billion. Chaparral, the second largest structural steel producer in North America, operates mini-mills in Texas and Virginia which together have an annual production capacity of 2.8 million net tons of steel. While mostly known for its wide flange beam production, Chaparral does make larger size channels, I-beams and round bars, and this will help to strengthen Gerdau Ameristeel's position in the North American market for those products.
On the import side, billet prices have been slipping in Asian markets and the Mediterranean Region forcing merchant bar mills in those regions to lower merchant bar offering prices.
Taiwanese merchant bar offers have fallen approximately $0.50 cwt. since our report two weeks ago and are now ranging from $33.00 cwt. to $34.00 cwt. ($728 /mt to $750 /mt or $660 /nt to $680 /nt) FOB loaded-truck, at Gulf and West Coast ports, though they are more dominant on the West Coast.
Turkish merchant bar offers have also fallen by approximately $0.50 cwt. since our report two weeks ago and are now ranging from $35.00 cwt. to $36.00 cwt. ($772 /mt to $794 /mt or $700 /nt to $720 /nt) FOB loaded-truck, US Gulf ports.
The import source that mostly dominates the Gulf region is Brazil. Arcelor Mittal has been importing merchant bars to the US at numbers more competitive than offers from Taiwan or China. SteelOrbis has learned that Brazilian offers have surfaced ranging from $32.50 cwt. to $33.50 cwt. ($717 /mt to $739 /mt or $650 /nt to $670 /nt) FOB loaded-truck, US Gulf ports.
License data from the US Import Administration show that for the month of June worldwide light bar exports to the US totaled 19,986 mt. The top three exporters to the US were Canada at 10,211 mt, Mexico at 2,760 mt and Brazil at 2,358 mt. The 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).
In general, the world steel market is going through a soft spot with quiet summer months as many steel professionals are on vacation. European, Asian, and Middle Eastern merchant bar prices have been softening, but these markets are expected to pick back up after summer.