CHICAGO December has shaped into a rather grim month for buyers and sellers of special bar quality (SBQ) products, with grave uncertainties leading market participants to stand pat on their inventories and resist taking deliveries before the first of the year.
"There is more than the usual year-end effect," a Chicago-area cold-finished bar processor told AMM Thursday.
Market participants "are seeing little confidence," even though first-quarter bookings are typically quite strong.
He attributed this to "trepidation over the macro issues, (namely) a lack of leadership in Washington. ... There is an economy out there waiting to rebound, but the leadership has gotten in the way."
Cold drawers, distributors and end-users all say that prices havent budged in the past six weeks. And although some players suggest that producers experiencing low capacity utilization rates and shortened lead times might offer discounts to a handful of large-volume buyers, theres no direct evidence that such transactions are being consummated.
"Everything is at a standstill. We are waiting for the government to do something," according to an East Coast distributor, who also reported that prices remain unchanged.
"People are livid; they are upset," one lower Great Lakes distributor said. "Theyre doing nothing. There is definitely a downturn right now."
During the first half of the year, the distributor was taking in 25 truckloads a month. Now hes down to eight. "We are living off inventory," he said, noting that he expects prices to decline, at least at the distributor level.
"Our competitors are starting to drop the number. ... My outlook for first quarter is: Yuck, " he added.
"We told purchasing to bring in the bare minimum of material. Mills are willing to hold shipments until after the first of the year," the East Coast reseller said.
"Nothing has changed. I wish there was a pricing issue," a multi-location cold finisher said. "Activity is really slow. Nobody is buying a lot."
The cold finisher was among those who said that certain bar distributors are selling at below-market prices.
"People are trying to get dollars in the door," another said.
A master distributor said that he believes the current demand slowdown will last well into 2013. "We will have to hunker down and be prepared for a tough first half. Customers are ordering onesies and twosies or nothing," he said, adding that they have held off on solid forecasting.
Two sources, both serving the auto industry, were more positive.
However, a manufacturer of automotive aftermarket products admitted that pricing in his hot-rolled bar supply contract for 2013 is 6 percent lower than that of 2012.
"Business is sort of good. We are enjoying optimistic times with the auto industry, which should continue into next year," a Detroit-area bar processor and distributor said. "(Next year) will be as good as this year, but we have to work harder to achieve it."