SBQ prices dip slightly as order entry dries up

CHICAGO — Spot prices for most special bar quality (SBQ) products have slipped slightly this month compared with May amid short lead times, plentiful inventories, stable input costs and languishing demand outside of automotive, buyer sources told AMM.

"We are hanging on as best we can," a Southeast bar distributor source said. "We hear end users are benefiting from excess capacity and short mill lead times."

AMM’s price for cold-finished Grade 1018 has inched down to $1,175 per ton ($58.75 per hundredweight) f.o.b. mill from $1,220 per ton ($61 per cwt) at this time last month, while prices for cold-finished Grade 12L14 have dropped to $1,210 per ton ($60.50 per cwt) from $1,240 per ton ($62 per cwt) previously. Hot-rolled 1000-series 1-inch rounds have shown a little more resilience, dropping just $3 per ton (15 cents per cwt).

Sources said that a lack of robust demand from most sectors besides automotive is largely to blame for the softer prices.

"Margins are weak for us in June. Customers aren’t taking a forward position, (especially) as mills are flexible and accommodating with their shipments. We would like to see more robust activity, but it’s not happening. Supply exceeds demand," the Southeast bar distributor source said.

A source at an Ohio Valley processor said his orders and shipments have not strengthened either. "We hope for a pickup by the end of the third quarter, but you can’t judge tomorrow," he said. "I just got an order by e-mail 10 minutes ago, at 4 p.m., and they want it tomorrow."

The upside is that with demand low, lead times from the mills remain short, he said. That means his closest suppliers can "get us a truck the next day," so he can meet immediate orders if he doesn’t have every size in stock.

An East Coast bar processor source said that order entries are sporadic. "The phone is ringing, then it isn’t," he said.

Looking forward, some SBQ market players aren’t optimistic an uptick is in sight. A source at a full-line distributor in the Great Lakes region, for example, sees a tough summer ahead. "As much as we want prices to firm up and go north, there’s no positive momentum for demand. Although automotive is very good, it’s not offsetting what’s lacking in other industries," he said. "Distributors would rather be out of a product than have steel at the wrong price on the shelf." However, "we are probably at bottom and so there may not be a lot of downside risk."

A Midwest bar sales executive agreed. "Summer is going to be lean," he said. "If our customers aren’t buying, we shouldn’t be either. Lots of people have been sitting on inventories."

One SBQ processor source said he had seen a pickup in one market—electric motors—which he attributed to a regional pickup in construction activity, especially home building, noting that motors go into everything from appliances to garage door openers.

His backlogs are filling up more quickly each month as a result, he said, but using normal caution, "we won’t buy any differently."

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