SBQ buyers report soft demand, price erosion

CHICAGO — First-quarter demand for special bar quality (SBQ) products has not proven as stable as many buyers and sellers had hoped, with a number of sources reporting reduced turns and hours of production at some mills due to less-than-robust order books.

"Our order book is slow. February was way off and March, too, from last year to somewhere between 2009 and 2010 levels," said an upper Great Lakes buyer. "That is in spite of automotive demand, improved housing starts and a rising stock market."

A source at a national bar distributor confirmed the apparent slowdown. "(Some mills) cut production a turn or two, and some hours, to create more backlog," he said. "They’re cutting overhead because business is not good. If they had an order book, they would not cut turns and hours."

Some market participants were more optimistic about the market for hot-rolled and cold-finished bar in the first few weeks of 2013, noting an uptick in shipments and slightly extended backlogs (, Feb. 15). But once the supply chain replenished empty shelves, activity slowed, according to sources.

"End-users are keeping it tight. They aren’t overinventoried; they are just overconcerned. If they had better optics on their own business, they would be more comfortable," one national bar sales manager said.

Although many market players have reported strength in the automotive sector in recent quarters, SBQ players say the slowdown in other sectors is largely offsetting that strength.

"We certainly could use a lot more business. Automotive is doing well but it doesn’t lead the whole country anymore," a second Great Lakes processor source said.

In fact, demand from nearly all other manufacturing sectors remains flat, the national bar distributor source said. "A lot of OEMs (original equipment manufacturers) are looking for orders themselves."

A source at an East Coast distributor agreed, noting that his customers "aren’t looking to the future. They are looking for today, living hand to mouth to keep costs down as much as possible."

With demand down slightly, sources are reporting slightly lower transaction prices as well. Spot prices for hot-rolled bar, 1000-series, 1-inch rounds have dipped slightly to an average of $858 per ton ($42.90 per hundredweight) f.o.b. mill this month from $860 per ton ($43 per cwt) in mid-February. Cold-finished Grade 1018 bar prices slipped slightly more, easing to $1,205 per ton ($60.25 per cwt) from $1,216 per ton ($60.80 per cwt) in the same comparison.

But that trend could reverse if mills’ announced scrap surcharge increase for SBQ products takes hold. Nucor Corp., Charlotte, N.C., appeared to lead the move, announcing in a letter to customers this past week that it will raise its surcharge by $43 per ton ($2.15 per cwt), effective with shipments April 1, based on an increase in AMM’s consumer buying price for No. 1 busheling scrap in Chicago (, March 12).

The East Coast distributor source, for example, said he expects to build stocks ahead of the April surcharge increase.

But the national bar sales manager said that hasn’t been the case just yet. "We saw a little life in February and hoped that March, with surcharges up—we anticipated those early—would bring more orders, but it doesn’t seem to have done that," he said.

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