CHICAGO Cold finishers, forges and distributors have expressed anxiety about the potential for excess domestic production capacity for special bar quality (SBQ) products, and particularly how an overabundance of supply may affect pricing down the road.
"Capacity increases are of concern," a southeastern distributor source told AMM. "Timken (Co.) brought on more (capacity). Nucor (Corp.) has enhanced its capability to produce more SBQ product. (Steel Dynamics Inc. put on) additional tons and they are kind of the wild card."
"I am concerned about overcapacity in the marketplace," a source at a Mid-Atlantic cold drawer said. "Republic (Steel Co.) is out with the Lorain (Ohio) furnace, but when they get it back up and running it could put downward pressure on pricing."
Overcapacity in the bar business is due to continued weak construction-related activity, he said, "so mills are all fighting for the same piece of business."
Once Fort Wayne, Ind.-based Steel Dynamics gets its 325,000 tons of incremental capacity online and Republic Steels Lorain melt shop is back up, "there is more than enough domestic capacity," one southern cold finisher said.
With a blown transformer causing a 47-day furnace outage in Canton, Ohio, last summer (amm.com, Aug. 6) and a November fire at the new electric furnace shop in Lorain (amm.com, Dec. 2), Republic "keeps stepping on their necktie," the cold finisher source said.
Sources pegged current mill lead times at four to five weeks for standard, common grades and sizes, and six to eight weeks for highly specialized products, especially those for automotive applications.
A forge operator source said that Republic isnt the only mill falling behind on deliveries (amm.com, Jan. 10). "Its on a case-by-case basis. Sometimes you get a partial order, sometimes you get nothing," he said of one producer he sees taking on additional business that demands a premium. Automotive orders "are what they are chasing."
Sources generally agreed that the anxiety occurs upstream, too. "Mills with a million tons to fill are now nervous to make it happen. The sooner the better," one buyer said.