NEW YORK Participants in the merchant bar market largely expect a recently announced price increase of $20 per ton ($1 per hundredweight) to hold, buoyed by rising scrap prices.
"People have controlled their inventory levels ... and the mills know what the inventory levels are. Scrap has some momentum to move up, so (mills) have a relative level of confidence that they will get (the increase) through," one distributor in the Midwest said, adding that this would likely be true for both large-volume buyers that typically get discounts off list prices and smaller spot players that have to pay close to list.
"The mills are saying that right now they have less (material) on the ground and scrap is going up so, well, you need to pay the (higher) prices," a distributor in the West said, adding that demand, while not rocketing, has been decent. "October was a good month for us. Its so far so good this quarter."
However, a second distributor in the West cautioned that persistent deal making in the merchant bar market made the effect of the increase on transactional prices harder to predict.
"For a price sheet, yeah, it has legs, but the price sheet means absolutely nothing. Everybodys doing deals," he said.
Sources werent surprised that the increase, launched by Tampa, Fla.-based Gerdau Long Steel North America, was followed by market leader Nucor Corp., Charlotte, N.C. (amm.com, Nov. 6).
"Its a justified increase. They have no reason not to follow (it)," the source in the Midwest said.
"(Gerdau was) awfully busy, thats why they took the lead," the first distributor in the West said, adding that he was now looking at increasing his foreign buys since domestic prices are poised to go up.
Mexican mills are still said to be dominating the import market due to slow domestic activity there.
"They are selling at extremely low prices and theyre going to everybody," one trader said.