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.
"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 previous month.
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) previously.
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 past.
"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."