Nucor-Yamato kept wide flange beam (WFB) prices stable for September shipments despite the drop in raw materials costs, but now that shredded scrap prices are falling dramatically, buyers expect the leading beam mill to decrease transaction prices.
Scrap brokers are telling SteelOrbis that shredded scrap prices are down approximately $145 /lt to $150 /lt in September. Although domestic WFB mills opted to keep their transaction prices stable last month despite the August drop in shredded scrap prices, this month will most likely not be a repeat. Steel service centers are saying that while they would like prices to remain stable so that their current inventory is not devalued, some fabricators need price breaks in order to offset some of their earlier losses.
Demand for WFB is still decent for the most part but has shown some softening in the last month or two. Commercial construction, a key market for beams, though much stronger than the residential market, has shown some signs of weakening. The WFB market in general is the slowest that it has been in the last year and a half. However, from a historical perspective, the market is doing pretty well.
Weakening demand coupled with a significant drop in scrap prices will almost certainly force WFB mills to drop their prices. For products like rebar and merchant bar which have weaker demand, the transaction price decrease is expected to be approximately half of the scrap decrease if not more; however, for beams, the price decrease might be a bit more mild since it is a much stronger product. Nevertheless, the domestic pricing trend is pointing strongly down as a decent sized price decrease is expected very soon.
Current prices for standard-sized beams (ASTM A992, W10 x 10, W18 x 6, W24 x 7) are at $57.60 cwt. ($1,270 /mt or $1,152 /nt) FOB mill for September shipments.
If the price decrease materializes, this month will be the first time this year that WFB prices will have fallen. Since the beginning of the year, domestic beam mills have been raising prices continuously. The year 2008 began with a mild $25 /nt increase in January, followed by a larger $65 /nt increase for February shipments. In March, the domestic mills kept prices stable, though they raised them by $20 /nt in April, followed by a huge $110 /nt in May, and by another $50 /nt in June. In July, Nucor-Yamato raised its prices by $30 /nt, followed by a $65 /nt increase for August shipments, and finally kept prices stable for September.
Although demand is softening, availability is still relatively tight for a couple of reasons. All of the major mills will be shutting down during a different week in the fall for routine maintenance. Also, in general, service centers have said that the mills seem to be reducing capacity, and there are reports that Gerdau Ameristeel’s Chaparral is putting together some export deals with Brazil, where the market is still hungry for beams. Export deals certainly help companies to keep their order books at healthy levels.
Imports, though still not a factor, are still being offered by a few trading companies to US customers. However, these offers, which are mainly from Asia, are still priced too high to gain any acceptance.
South Korea has offered WFB to the US West Coast at numbers right around $60.00 cwt. ($1,323 /mt or $1,200 /nt), FOB loaded truck within last month. However, at the current domestic level, West Coast buyers can have domestic beams delivered for approximately $61.50 cwt. ($1,356 /mt or $1,230 /nt). With domestic numbers trending strongly down and imports not expected to arrive until early next year, it’s too big of a gamble for most. The price gap would have to be at least 15 percent for any US buyers to budge.
Taiwanese material is still out of range for US buyers, in the vicinity of $10.00 cwt. ($220 /mt or $200 /nt) higher than domestic levels, even though Taiwanese domestic longs market has been slumping lately. Taiwanese mills are expected to adjust their numbers shortly to drum up some business in North America.
License Data from the US Import Administration show that in August 2008, imports of H-sections to the US totaled 6,943 mt with Luxembourg, Mexico, and Korea as the top exporters with tonnage 4,829 mt, 1,222 mt, and 318 mt respectively. Census Data for July 2008 showed tonnage that was more-than-double that for August, at 15,449 mt; however, in general, both months were slow for imports (Census Data for August may show somewhat higher numbers than the License Data).