CHICAGO Domestic special
bar quality (SBQ) prices appear to be on the downswing as the
$50-per-ton base price increases announced in mid-June have
failed to gain traction at the same time that scrap surcharges
registered a decline of $65 per ton.
The price increase, originally
expected to go into effect with July 1 shipments, "did not pan
out," an upper Great Lakes cold finisher said. "The reality is
that we are paying as little as possible, depending on how much
material we place. The mills are willing to work with you if
you have a decent-size order."
A Great Lakes bar distributor
confirmed that "prices are dropping," noting that because one
mill "didnt go along, all of them rescinded."
A salesman for an Ohio Valley
bar distributor agreed that the SBQ market had lost ground.
"The price increase didnt go through. Business is
terrible. I think the party is over," he said.
At least five domestic producers
of engineered bar products had announced a $50-per-ton base
price increase in mid-June (AMM, June 21), a move that
some distributors and consumers told AMM at the time
was "a mistake." The scrap surcharge on SBQ was simultaneously
slated to move down by $65 per ton in July after AMM
lowered its No. 1 busheling price for Chicagoused by some
mills as the basis for their raw materials surchargesby
the same amount (AMM, June 7).
On Tuesday, AMM lowered
its No. 1 busheling price for Chicago by a further $43 per ton
(AMM, July 11) in a move that some SBQ buyers said
could put even more pressure on prices in the weeks ahead.
"July (scrap tags) are going to
go down another ($43 per ton), so weve not hit bottom," a
Southern bar distributor predicted. "Its going to be a
long, hot summer."
A second cold drawer echoed the
comment, saying "the surcharge component has fallen and will
supposedly fall again next month."
The upper Great Lakes cold
finisher agreed with forecasts that scrap and steel pricing
will continue to move downward during "the lull of 2012," but
said he believes "we are at or near the bottom, and within 60
days (both ferrous scrap and steel prices) could go up 5
The pullback in pricing comes on
the heels of a fairly robust start of the year for the
specialty steel sector.
"We were so busy for so long.
And now we have all this new capacity coming on, which could
not come at a worse time. Customers are busy, but they are
getting killer pricing," the salesman for the Ohio Valley bar
distributor said. "The spot market is depressed, and people are
giving their margins away. Scrap is plummeting. Im
waiting for base price decreases, to be honest with you. There
is all kinds of pushback."
The cold finisher agreed, noting
that pricing is particularly difficult downstream "because
people are selling at little to no margin; they have to be
based on previous inventory cost."
Meanwhile, buyers report mixed
signals on the demand front. Automotive and agricultural
equipment remain healthy, but some parts of the energy market
are being negatively impacted by lower oil and gas prices, as
well as excess foreign supply, sources said. "Energy
applications are taking a beating because of imports," one
Midwest source said.
However, one Mid-Atlantic drawer
said he wont tighten his belt because, although
"everybody is seeing a little softness in demand," business is
steady. At the same time, "we do see smaller (volume) orders
and the dollars per order seem to be smaller," he said.
Meanwhile, the Great Lakes
distributor said he finds that "customers are not as busy as
they were. ... Nobody is excited right now. Im talking to
a customer today who is off 80 percent with us; he went to 30
hours. When you hear that from good customers, its