As the steel market awaits official scrap prices for September, market chatter is suggesting that shredded scrap numbers may be down by well over a hundred dollars per long ton, which could result in a quick move by Nucor to lower its merchant bar numbers as well.
Shredded scrap prices have been trending down for the last two months, but this month in particular may bring a huge decrease, one that long product mills won’t be able to ignore that will push them to lower their transaction prices by a significant amount. SteelOrbis has been told that shredded scrap numbers could fall by as much as $160 /lt. With such a large decrease in raw materials costs expected, domestic mills are preparing to lower their numbers. Although there had not been any official announcements made by domestic mills at press time, the general feeling in the market is that merchant bar prices will most likely fall by as much as half of the scrap price decrease, i.e. by about $80 /nt ($4.00 cwt. or $88 /mt).
Besides the expected decline in raw materials prices, demand has been softening, creating a market situation that insists on lower prices and better deals. Right now, no one is buying as the market is expecting to see lower prices in the next couple of weeks.
Domestic merchant bar prices are currently ranging from $52.20 cwt. to $59.90 cwt. ($1,151 /mt to $1,321 /mt or $1,044 /nt to $1,198 /nt) depending on size, shape, and thickness; however, the pricing trend is strongly down as prices will be falling in the next week or so.
The next price decrease hits that the market will only be the second price decrease of the year. Last month was the only month since January that domestic merchant bar mills lowered prices. For the months prior, mills had a wave of increases: merchant bar prices increased by $25 /nt for January shipments, $60 /nt for February, remained stable for March, increased by $25 for April, $147 /nt for May shipments, $40 /nt for June, $35 /nt for July, and $65 /nt for August 1 shipments, then dropped $30 /nt ($33 /mt or $1.50 cwt.) in mid-August. It seems that the trend seen in the first 8 months of the year has finally come to an end.
The downside of the slowing demand and lower raw material costs may be offset by the up-side that, at the very least, domestic mills are remaining competitive with offshore numbers, keeping the market supplied with domestic material. Although prices have been decreasing on a global scale, import offers are still not quite attractive enough to buy just yet, especially with the domestic market trending down so strongly. Current import offers are still a little too high to pique buyers’ interest, especially with shipments not arriving until December or January.
Taiwanese offers have been surfacing at slightly lower numbers, though they are not sparking much interest from US buyers. Offerings from Taiwan are in the range of $56.00 cwt. to $58.00 cwt. ($1,235 /mt to $1,279 /mt or $1,120 /nt to $1,160 /nt) FOB loaded truck, US West Coast ports.
Turkish merchant bar offers are have come down significantly since our last report two weeks ago, as billet prices have dropped, creating lower-cost raw materials for Turkish mills. New Turkish offers, realistically, calculate to a range of $51.00 cwt. to $53.00 cwt. ($1,124 /mt to $1,168 /mt or $1,020 /nt to $1,060 /nt) FOB loaded truck, US Gulf Coast ports. With such a significant price cut in the last two weeks, Turkish mills may begin to find some traction from US buyers for 2009 arrival, as soon as the US market stabilizes.
License Data from the US Import Administration show just how much imports have slowed in the last year. When comparing the three-month span of June, July, and August 2007 with the same three-month span of the current year (using June and July Census Data, August License Data), US merchant bar imports fell by approximately 16,259 mt. August in particular was a slow month with tonnage totaling 14,552 mt in 2007 and only 8,727 mt in 2008 (though the Census Data for August 2008 may show a slightly higher number). 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).