With commercial construction showing signs of weakness and the housing market seeing no rebound in sight, merchant bar demand is softening and import tonnage is decreasing.
Merchant bar imports compared to last year are down according to the data from the United States Import Administration. On average, worldwide import tonnage for 2006 totaled 22,900 metric tons (mt) per month. In the months surrounding June of last year, numbers were decent with April's tonnage totaling 30,000 mt, May with 19,600 mt, June with 21,600 mt, and July with 30,700 mt. For June 2007, import tonnage (with data collected through June 26) is totaling approximately 13,500 mt, significantly lower than last year. The top three exporters to the US for June are Canada with 5,100 mt, Mexico with 2,700 mt, and China with 1,600 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).
Although China has been one of the major exporters of merchant bars to the US in recent months, things may change as offering prices will go up. As mentioned in our last report two weeks ago, the newly imposed export tax on Chinese merchant bars has added an additional $2.75 cwt. ($61 /mt or $55 /nt) onto mills' costs. However, Chinese domestic billet prices are continuing to slip, helping to offset a portion of the export tax cost. Still, the offers are higher-priced than pre-export tax offers and the pricing trend for Chinese merchant bars remains up.
After attempting to raise their asking prices, Taiwanese mills were forced to push prices back as there were no takers for Taiwan's higher numbers. Offerings from Taiwan have remained the same since our last report of two weeks ago, still ranging from $33.50 cwt. to $34.50 cwt. ($739 /mt to $761 /mt or $670 /nt to $690 /nt) FOB loaded-truck, at Gulf and West Coast ports, though they are more dominant on the West Coast.
Billets in the Mediterranean region have continued to soften, pushing merchant bar offerings from Turkey down another $0.25 cwt. since our last report. Turkish offers to the US are now in the range of $35.50 cwt. to $36.50 cwt. ($783 /mt to $ 805 /mt or $710 /nt to $730 /nt) FOB loaded-truck, US Gulf ports. The pricing trend in this region is slightly down as prices could slip a little further in the upcoming weeks.
The import source that mostly dominates the Gulf region is Brazil. Belgo Mineira, owned by Arcelor Mittal, has been importing merchant bars to the US at numbers more competitive than offers from Taiwan or China.
Domestic market players had expected more strength in the market for this time of year; however, compared to other markets such as wire rod and flat rolled, things are decent. Even though demand is a little sluggish, the domestic pricing trend is neutral as prices are not expected to fall in August. Scrap prices are expected to stay relatively steady throughout the summer, most likely allowing merchant bar prices to remain firm.
Currently and throughout the month of July, 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.