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Cheaper scrap pulls down SBQ transaction tags

Keywords: Tags  Special bar quality products, SBQ, spot price, scrap surcharge, demand, supply, lead times, inventories


CHICAGO — Spot transaction prices for hot-rolled and cold-finished engineered bar products have fallen on average by a little more than $2 per hundredweight ($40 per ton) due to falling scrap surcharges, even as domestic producers’ base prices continue to hold firm, market sources told AMM.

Transaction prices for the more common "vanilla" grades of special bar quality (SBQ) steel products have fallen the most, according to cold drawers, distributors and processors. Transacted prices for hot-rolled 1-inch round, 1000-series bar has dropped roughly $3.75-per-cwt ($75-per-ton) since March to $49.50 per cwt ($990 per ton), while cold-finished 1-inch round, 4140 (alloy) is only down 65 cents per cwt ($13 per ton) on average to $82.50 per cwt ($1,650 per ton), sources said.

As transacted prices come down, some distributors have reported a slight margin squeeze as competition heats up among those looking to draw down their fully stocked inventories.

"You’ll lose some money with guys trying to move inventory," said an Ohio Valley bar processor, noting that nonetheless, the overall market is still strong. "There are no bloodbaths. We’re still busy, and demand is still out there."

A Mid-Atlantic cold finisher agreed the SBQ market remained fairly robust, despite the falling transaction prices. "Bookings are ahead of where we were last year, and we’re slightly ahead on the revenue side by 6 to 7 percent," he said.

And while transaction prices have been slipping due to falling surcharges, he noted that base prices have been stable. "We’ve only seen the surcharges falling," he said.

The stable base prices come as producers normalize their lead times, which, in some high-end grades and larger diameters, were being quoted out as far as 72 weeks as recently as February.

Lead times are now at between six and 10 weeks at one mill, 10 to 12 weeks at a second and up to 16 weeks at a third, said the cold finisher, who checked the schedules Friday.

"Some mills still have us on allocation, and some are still six months out on thermal-treated products," a Southeastern bar processor added.

But while demand has mostly held up, a few buyers said they still worry about summer pricing.

"Volume has dropped off a little," said a Great Lakes drawer. "The mills are caught up to the supply shortage. I think we’ll see some downward pricing pressure. A lot of imports are hitting and due in at lower numbers. Everybody has inventory now. We’ve already seen our competition drop their prices."

But others are more optimistic. "We have our fingers crossed that it keeps moving forward," the Southern buyer said.


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