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Steel beam demand said in holding pattern

Keywords: Tags  steel, beams, structural steel, scrap, discounts, imports


LOS ANGELES — The structural steel market continues to tread sideways, with most buyers anticipating a holding pattern through the third quarter and possibly until the end of the year.

While some beam buyers said they think demand could turn around later in the year and a few said that there has actually been an improvement, most said they expect the rest of 2013 to be flat as they await a real recovery in nonresidential construction.

"We’re hoping for steady; we’ve minimized our inventory," a Midwest distributor said. "At this point, we have no outlook for an uptick."

But steady demand does not necessarily mean steady pricing, sources said. In early June, mills told customers they were holding published transaction prices for structural products unchanged, which—in the case of wide-flange beams—means the published f.o.b. mill price on core sizes would stay flat at $765 ($38.25 per cwt).

However, once foreign-fighter and other discounts are included, medium and large service centers are reportedly buying beams at the mill in the range of $720 to $740 per ton ($36 to $37 per cwt).

"I haven’t bought a single beam in the last six months that wasn’t discounted," one West Coast distributor said.

Additionally, beam buyers are waiting to see what will happen with the raw material surcharge. Traditionally, beam mills announce their raw material surcharges after AMM settles its consumer buying price for shredded automotive scrap in the Chicago market, but in recent months, major mills have set their next month’s steel prices before the scrap trade ends.

Late last week, AMM reduced its consumer buying price for shredded automotive scrap in the Chicago market by $8 per ton to $360 per ton (amm.com, June 7), but most structural mills had already announced their plans to hold prices flat.

Whatever the fate of the surcharge, market players said it appears few steel buyers will look at raw materials the same way they did before 2004, when a global steel market recovery and soaring metallics costs gave rise to the surcharge, which in turn provided the mills with a rationale for boosting prices.

"When they implemented the surcharge, it brought a whole new thought process into the industry," a Midwest distributor said.

Buyers noted this week that they’ve learned their lesson about scrap all too well, expecting a steel price increase when scrap is rising but lobbying the mills to cut prices when it’s falling, and their practice of routinely tracking its market swings will continue with or without formal surcharges.

"That’s not going away," a Midwest service center executive said, adding that buyers "are absolutely conditioned" to follow scrap closely.


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