CHICAGO Announced price
increases for special bar quality (SBQ) steel products appear
to have stuck in large part in September, although buyer
sources question how long prices will hold up in the second
half of the year, given increased supply and lackluster
"Demand moving into year-end
looks weak. And customers think scrap will go down so
theyll wait for the price to go down, especially if they
dont need material now," said one bar distributor, who
cited lead times of six to eight weeks.
Other market sources, some of
whom said demand had declined markedly since July, said lead
times for SBQ were as low as four to six weeks.
On the pricing front, Charlotte,
N.C.-based steelmaker Nucor Corp. said it would lower its raw
material surcharge on SBQ to $217 per ton ($10.85 per
hundredweight), a decrease of $33 per ton ($1.65 per cwt),
effective with shipments Oct. 1, according to a letter dated
Wednesday. Some sources said the decrease was less than they
had expected, and they had not seen any immediate changes in
the market as a result of the move.
Nucor had announced last month
it would raise its raw material surcharge, effective with
shipments Sept. 1, by $83 per ton ($4.15 per cwt) from the
Market sources said 1-inch round
1000 series (carbon) prices averaged $910 per ton ($45.50 per
cwt), up $45 per ton ($2.25 per cwt) from $865 per ton ($43.25
per cwt) last month, while 1-inch round 4100 series (alloy)
product averaged $1,065 per ton ($53.25 per cwt), up $60 per
ton ($3 per cwt) from $1,005 per ton ($50.25 per cwt)
Most buyer sources contacted by
AMM said the September raw material surcharge increase
for SBQ had been accepted, at least in part, by the market. But
some sources also predicted that prices would decline in the
second half on lower scrap tags and slowing business activity.
Sectors that had shown strengthsuch as automotive,
energy, and heavy truck and equipmentare now showing
signs of having peaked, some said.
One distributor, for example,
questioned how long buyers might be willing to pay most or all
of the scrap increases, especially given what he said was an
SBQ market characterized by too much inventory, allowing buyers
to shop around for deals. "If order books were stronger, people
would not take that risk," he said. "But there is a lot of
uncertainty in the market and people are very apprehensive"
about placing orders.
Chief among the uncertainties
facing the U.S. market is the upcoming presidential election,
market sources said. But other worries, including the European
economic crisis and a slowdown in China, also are dragging down
the market, they said.
A bar service center source said
weak markets in Europe and the situation in China were
resulting in increased imports into Houston ports, sometimes
unsold and available at low prices. But he said U.S. companies
also are to blame for the current soft market, with discounts
perhaps more readily available than they had been in the
"When lead times went out to a
year, everyone decided to add new capacity," the service center
source said. "Some of that capacity is not even online yet ...
but you will get an attentive audience (from mills) if you walk
in with significant tonnages (to order)."
The service center source said
some mills might move up planned outages to cope with the
current soft market.
But a second service center
source said his company had seen a pickup in business activity
in recent weeks after a sharp slowdown in July. The turnaround
has not been as robust as his firm might like, and its
not clear what is driving it, he said.
He agreed that the current SBQ
market was plagued by too much inventory and not enough demand,
but he reasoned that the situation could change quickly if the
market were to regain a sense of direction, something he said
might be possible once the presidential election is over.
"Nothing is really happening
until after the elections," he said. "But at some point, people
have to jump back in the market and buy."