CHICAGO Demand for engineered bar products has fallen sharply during the fourth quarter, according to cold finishers, service centers and end-users, but transaction prices were flat to up slightly during the first two weeks of November as buyers made smaller-volume purchases.
Spot quotes this week on hot-rolled 1000-series rounds were up 8.6 percent from a month ago. Despite shortened lead times and plentiful material throughout the supply chain, special bar quality (SBQ) steelmakers are maintaining their discipline and not providing discounts, many buyers told AMM.
"The November price is basically flat. The dilemma for the mills is they cant live with prices where they are at and cannot create demand," a source at a northern Great Lakes bar processor said. "Demand is not as good as youd want. Customers are still not able to forecast and they are just grinding it through the rest of the year."
However, sellers "are not going to try to cut a deal to make their number," he said.
Instead, sources said, producers are controlling the cost side and curtailing production, which also helps selling prices to a degree.
Although the scrap surcharge is expected to rise by between $2.50 and $2.65 per hundredweight ($50 to $53 per ton) for December, bar users dont expect to buy ahead of the increase.
"Order activity is not encouraging," a source at a Mid-Atlantic cold drawer said. "We have orders placed (with mills) well into next year, but we are behind the curve from this time last year. We have one really good customer whose inventory is in good shape and his industry is in good shape, yet we dont have orders from him yet for December and January. People are nervous and not making decisions."
"Our order book is slow and were not taking much steel," a source at an Ohio Valley bar distributor said. "We reduced inventory last month 10 percent and will bring it down another 10 percent this month.
"With this type of activity, dont you think were near bottom? Customers said the election, the election, but that doesnt solve crap," he said. "I have automotive customers with 300 to 400 employees who are cutting half their staff because Obama was re-elected."
Several buyers said their customers had pulled back orders and cut production, especially in the heavy truck market. But so have mining and agricultural equipment makers.
"At best, we dont expect to see much improvement through the balance of the year. The forecasts were getting are down 5 to 10 percent for next year," a Great Lakes service center executive said. "The Caterpillars and Deeres have overbuilt some. Transactional business is way down. Until the fiscal cliff is solved, you wont see a huge amount of business investment."