Chinese merchant bar offering prices to the US have increased rapidly since China's export tax was implemented on June 1. It was once feared that Chinese imports were about to flood the US market; however, legislative developments have helped to curb the likelihood of this happening. In an effort to further reduce energy consumption and pollution in China, the Chinese finance ministry has implemented an export tariff of between five and ten percent for a total of 83 types of steel products, including wire, hot rolled plate and steel sections. Merchant bars took a ten percent hit as of June 1, and we are now beginning to see the full effects of China's decision. The 10 percent tax on merchant bars has increased the Chinese mills' costs by approximately $2.75 cwt. ($61 /mt or $55 /nt).
At first, most traders doubted that the Chinese mills would be able to pass on the full increase to customers since the merchant bar market in the US wasn't too strong. However, looking at the new offers it appears that the Chinese mills, after only two months, are passing along most of the increase. In addition to the export tax, merchant bars from China also have no VAT rebate. One week before the June 1 export tax was imposed, Chinese merchant bar offers to the US were ranging from $35.00 cwt. to $36.50 cwt. ($772 /mt to $805 /mt or $700 /nt to $730 /nt) FOB loaded-truck, at Gulf and West coast ports. After implementing the export tariff on merchant bars, Chinese offering prices increased weekly and are now in the range of $38.00 cwt. to $39.50 cwt. ($838 /mt to $871 /mt or $760 /nt to $790 /nt) FOB loaded-truck, at Gulf and West Coast ports.
These higher prices are not selling because they are too close to the domestic merchant bar price range. As there are no takers, there is a chance that Chinese mills may get more aggressive with the fourth quarter as winter approaches. Import offers from other countries are relatively stable. Taiwanese merchant bar offering prices have remained the same since our last report of two weeks ago, with offers still 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. FOB prices declined a little but rising freight rates have equalized the offers. Turkish merchant bar offerings have also remained stable since last reported two weeks ago. Offers are still in the range of $35.00 cwt. to $36.00 cwt. ($772 /mt to $794 /mt or $700 /nt to $720 /nt) FOB loaded-truck, US Gulf ports.
Billet prices as well as freight rates from Turkey are going up and, as a result, Turkish merchant bars are trending up again. Brazil is currently dominating the Gulf region with offers more competitive than offers from China, Taiwan, and Turkey. Domestically, prices are stable for August.
Nucor has announced that prices will remain at July levels throughout the month of August; however, market players suspect prices may fall in September, so the pricing trend is down. The reasoning behind this assumption is based on the current demand situation. Non-residential construction has been weakening some, preventing demand from strengthening. Also, in recent months, scrap prices have been trending sideways, not giving long product producers a good reason to increase prices. Current domestic merchant bar transaction prices are still 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 and will remain in this range throughout August.