CHICAGO Demand for special bar quality (SBQ) products is typically a tale of two marketsautomotive and nonautomotivebut the divide now seems more pronounced with stocks of automotive material at "dangerously minimal" levels, buyers told AMM.
Two major automotive-grade SBQ producers "cannot get caught up" on their scheduled deliveries, an eastern Great Lakes forge operator said.
"Inventories are extremely, dangerously minimal throughout the supply chain. You cannot get everything and, as soon as you do, youre putting it into your processing line and manufacturing it," he said, adding that short supply means certain vehicle assembly lines are "on the verge of shutting down every day."
A distributor to auto suppliers agreed, saying lead times for automotive SBQ are stretching into March. "Mills are very busy and close to shutting down (auto) plants."
But among those consuming nonautomotive grades, supply is not as taut.
"We are not seeing lead times pushed out among our vendors," a southern SBQ buyer said. "Were finalizing rollings for December now. But if your mills are tied to auto, those rollings are already into February and March."
Most domestic bar producers have capacity utilization in the mid-70 percent range and lead times are five to six weeks, "which puts no pressure on pricing," a Midwest bar processor said.
"Demand is not that strong but, for being the middle of November, business has not dropped off," a Mid-Atlantic cold finisher said, adding he plans to hold his prices flat.
"If youre in automotive, youre doing well and youre optimistic for 2014. Other industries are flat. Theres nothing exciting going on," a national distributor of bar, rod and wire said.
AMMs five tracked SBQ prices moved slightly higher Nov. 14, up $6 to $16 per ton, compared with a month previously, largely because deliveries will occur in December, when the scrap surcharge will rise $30.
More than a half-dozen buyers agreed that spot and contract base prices will remain flat heading into 2014 and beyond. "The base is status quo," the national distributor said.
Talks continue on 2014 contracts. "The fact that mills are dragging their feet to address pricing means they fear a reduction for 2014," the forger said.
"If they were going for a big increase, they would roll it out earlier to give people a chance to fight it out. (This year,) theyll come in December and offer a flat base year over year and then try to get it signed quickly," he predicted.
He surmised that some producers would love to raise 2014 prices but cannot do so under the burden of delayed deliveries. On the other hand, "I dont think it will go lower. I think weve see the bottom on pricing."
The first distributor agreed. "We have seen stabilization."
He and other market participants said they will not go long on tons, will try to keep inventories in line with demand and turn them frequently. "Were not speculating. Thats a bad word around here," one source said.