NEW YORK Mill buyers and
distributors of merchant products were left with unanswered
questions and devalued inventories following the unexpected
$50-per-ton price drop by major domestic mills last week, with
many of them blaming competition with imports for the
"Our inventory got slashed
overnight. Im not quite sure what brought it on. Im
just as puzzled about it as anyone. Exactly what was behind it,
I dont know," one distributor said.
Nucor Corp. lowered its prices
on merchant products by $50 per ton effective with Feb. 15
amm.com, Feb. 15) and Gerdau Long Steel North
America and Fort Wayne, Ind.-based Steel Dynamics Inc. (SDI)
followed suit the next day (
amm.com, Feb. 20).
Sources at service centers, as
well those at mills who had to lower prices to match Nucor,
struggled to explain the dramatic drop at a time when
construction is expected to heat up for the spring. Some said
the price decrease could have been a defensive move to remain
competitive with imports.
"Its unusual in light of a
projected uptick in scrap in March and its unusual ahead
of construction," one market player said. "Weve heard ...
that Nucor was concerned about some Mexican imports and maybe
some from Turkey as well, but they also in their price letter
indicated domestic discounting."
However, other sources
hadnt noticed significant enough changes in import prices
to warrant a drop in domestic tags.
Charlotte, N.C.-based Nucor also
lowered its raw materials surcharge by $9 per tonne effective
Feb. 15. The dropbased on AMMs consumer
buying price for shredded automotive scrap in Chicago, which
settled down $9 per ton earlier this month (
amm.com, Feb. 7)was the first since
The scrap decrease was also
considered unusual because prices historically tighten in the
winter months, and lifted steel long product tags with
"They said (the decrease) was
because of scrap," a second distributor said. "Normally, in
January and February you see a rise in pricing. This year you
Scrap looked set to drive upward
next month, with steel mill buyers and scrap suppliers
expecting a $10 to $20 price recovery in March to match January
numbers after February scrap prices eased $8 to $20 per ton,
depending on city and material grade.
The price decrease has put
margins under pressure at some mills and distributors.
"It devalues our inventory, so
everything we bought is now $2.50 less (per hundredweight),"
the second distributor said.
"It was very unfortunate. It
lowered the bar for everybody. Its going to be difficult
to operate at a break-even price," the first market participant
But distributors are powerless,
they said, adding: "Were like the bottle in the ocean:
the wave crashes, we go with it."
Sources at Nucor declined to
comment on the price change, but reiterated the wording in the
pricing letter, which said the changes were made "to respond to
competitive conditions (i.e. imports, domestic