CHICAGO At least two major mills have announced plans to boost long products prices in response to a rebound in domestic scrap tags.
Nucor Corp. said it plans to increase net prices on reinforcing bar, merchant bar and structural bar products by $35 per ton ($1.75 per hundredweight) effective with Dec. 1 shipments.
The Charlotte, N.C.-based steelmaker said in a letter to customers dated Nov. 9 that the hike comprises a $52-per-ton ($2.60-per-cwt) increase in the companys raw material surcharge combined with a decrease in base prices of $17 per ton (85 cents per cwt).
Tampa, Fla.-based Gerdau Long Steel North America jumped on board Monday, announcing in letters to customers a $35-per-ton increase on rebar and most angles, channels, flats, rounds and squares. Gerdau said its increases are effectively immediately on all new orders, while existing orders will be price protected provided they are shipped prior to Dec. 1, the company said in its Nov. 12 letters.
Market players said they were widely expecting other mills to follow.
The price increase announcements come after AMMs consumer buying price for shredded scrap in Chicagoused as the basis for some mills surchargesrose to $387 per ton, a $52-per-ton gain from Octobers levels (amm.com, Nov. 7).
Several market sources questioned why domestic mills announced an increase of less than the full $52-per-ton scrap price rise, with some citing poor demand and others pointing to import competition, especially on merchant products in the southern United States. But others noted that mills hadnt moved finished steel prices in lockstep with scrap when pricing for the raw material fell in recent months either.
Some market players said product demand has picked up in the days since the increase was announced as buyers looked to get orders in ahead of the hike.
"Ive been busy. Ive got a million quotes to do," one rebar distributor said, noting that some sizes were already in short supply, and thus the increase was essentially in effect immediately for those items.
But other market sources were less optimistic on demand prospects. "Demand is not great. I dont know that anyone would want to go long. There is just too much uncertainty," a second rebar buyer said. "I understand that the mills have to deal with the change in their costs. ... But the first half of next year is shot."
He predicted that demand would remain sluggish as the market tries to digest the impact of the recent U.S. elections on the marketplace, something he and other sources predicted could take as long as six to eight months.
Market participants also pointed to increasing volatility of scrap tags and finished steel prices, noting that it has become hard in some cases to convince downstream buyers that prices are truly as volatile as they have been in recent months despite an essentially unchanged marketplace.
"The difficulty is the constant fluctuation," the second buyer said. "A $20-per-ton move used to be huge. Now $40 to $60 per ton gets thrown out like a glass of water."
Some buyer sources argued that if scrap prices continue to rise without a marked improvement in demand, a short-lived pricing bubble could develop.
But a mill source said his company had little choice but to raise prices. "We cant sell at a loss. If scrap goes up, youve got to cover it," he said.