downward trend in demand for specialty bar products has greatly
changed the mood of steel distributors when it comes to
inventory control and expectations of mill price changes.
Players in the special bar quality (SBQ) market also are
keeping their eyes on imported products, and many are divided
over what impact imports have had on the domestic market.
Although domestic SBQ demand was remarkably strong in 2011
and pushed mill lead times and prices up dramatically, it has
slowly melted away this year, with most cold finishers and
end-users saying they hope the midyear point marked the bottom
of the market.
Announced price increases for SBQ products appeared to have
stuck in large part in September, although buyer sources
questioned 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
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, a far cry from the 13 months quoted during
the first half of 2011.
July was poor, said a source at a distributor in
the upper Great Lakes region. Volume was down and price
was down significantly, related to the reduction in scrap
surcharges. August (did) not really change much, but for the
most part the discounting stopped.
Most buyer sources contacted by AMM said the
September raw materials 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 equipmentwere showing signs of having peaked,
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.
Spot market pricing for SBQ products so far this year has
followed the trajectory set by the AMM consumer buying
price for shredded automotive scrap and No. 1 busheling, used
as the basis for certain mills surcharges. The SBQ
products tracked by AMM declined by $45 per ton in
August, based on how far mills raw material surcharges
had fallen. 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 Sept. 12 letter. 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.
But another service center source said his company had seen
a pickup in business activity after a sharp slowdown in July.
The turnaround had not been as robust as his firm might like,
he said, and it was not clear what was driving it.
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
Most people have talked about it: 2012 just
didnt happen, a national bar sales executive said.
There were great expectations. Now there is a lot of
apprehension. A lot of markets are slow, as are a lot of
customers. Mining, automotive, heavy equipment is said to be
goodbut really, where the hell is it? There is quoting
activity, but orders are still slower than earlier in the year,
and the volume of opportunity is lower.