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SBQ tags weaken on slow demand, destocking

Keywords: Tags  special bar quality, SBQ, steel prices, SBQ inventories, steel demand, hot-rolled bar, cold-finished bar, Corinna Petry

CHICAGO — With demand expected to wind down over the next 10 weeks, buyers of hot-rolled and cold-finished special bar quality (SBQ) products are sitting on the sidelines as they wait for prices to bottom, which they anticipate will happen in December.

Meanwhile, October’s market for SBQ has been weaker for some than September’s, which was already weaker than it was a year earlier.

"The market will be soft through the end of the year, as there’s nothing to spur it along," a bar distributor in the lower Great Lakes predicted. "The Marcellus Shale has seen a pickup, but there’s too much overstock. It’s a slugfest between the mills and between the distributors (to grab orders)."

A southern cold finisher agreed. "We are seeing too much supply (at a time when) manufacturing is being very cautious. ... Inventories are high, (which places) downward pressure on prices," he said. "We think there will be a December buy, that (the) bottom will have been reached. Nobody wants to see it go lower, but it will."

A bar processor in the same region argued that base prices have remained flat this month, adding that he doesn’t foresee any change in base pricing even through the first quarter of next year.

"We are slowing up except for really good buys," a northern distributor said. "It’s a typical fourth quarter, where you don’t want to get heavy on inventory. We are still buying truckload quantities, but customers are not bringing in too much of any particular item."

An East Coast distributor noted that "material costs from the mills have been coming down in the last couple weeks. We have put word out to our purchasing department not to buy based on the inventory we went through during the first three quarters. Some customers are starting to slow down."

There is also new pressure on pricing at the service center level, an Ohio Valley source told AMM. "If a customer calls to say you’ve been selling him at 60 cents (per pound) for two years but now that’s not good enough, you meet the market or sit on the steel. But we want to get rid of steel," he said. "Scrap is expected to drop another 3 cents a pound (affecting November bar prices)."

A Great Lakes forger said he doesn’t know of any customers reporting less than a 25-percent reduction in activity since midyear. "It’s across the board. The only industry holding up is oil and gas," he said.

Steel mills "spent a year getting prices up, and now we see discounting going on," a Great Lakes service center executive said. "We now are getting the same price for half a truckload (as full loads previously) because mills have capacity and they’ll do a deal."

Spot prices for hot-rolled 1000 series round bar below 3 inches is said to be averaging $41.40 per hundredweight ($828 per ton). Sources pegged hot-rolled 4100 series in the same diameter range at $44.90 per cwt ($898 per ton).

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