It looks like that summerscrappricing uptrend has panned out after all. Early spring predictions of sustained increases through the summer came to a screeching halt in April, when pricing began a long downward trend until August. And now, only a couple weeks since this month's announcement, the rumor mills are already churning about another increase in September.
Why the sudden turn of events? Partly responsible is the lowscrapavailability in the domestic market, making it difficult for steel mills to obtain sufficient tonnage. Another reason for the reversed trend is highscrapexport prices, despite Turkish mills (one of the leadingUSscrapimporters) slowing their purchases this past week during Ramadan. Even after the holiday is over, domestic availability in theUSis not expected to improve, and many in the industry are predicting that the typical end-of-summer inventory build-up will not be strong this year.
Current speculation for Septemberscrappricing is another increase of about $20-$40/long ton.
The current increase inscrappricing has had mixed reactions among different steel products. Long products, for example, all saw a price increase of about $1.25 cwt. ($1.50 to $1.75 cwt. forwire rod) offered a collective shrug, and didn't necessarily scramble to stock up inventory before the September 1 shipment date took effect.
Wire rodbuyers were rather skeptical as to whether the increases would hold, and continued to make order-based, rather than inventory-based purchases. Domesticwire roddemand is not terrible at the moment, with some end-use sectors, such as automotive and equipmentmanufacturing, balancing out the worse-off sectors such asconstruction. But evenconstruction-boundwireproducts such aswiremesh are beginning to see hope on the horizon-mesh producers see commercialconstructionon the brink of picking up, and foresee residentialconstructionfollowing not long after. Drawnwireis also poised for near-term improvement, as reports surface ofwiredrawers and end-usewiremanufacturers expanding facilities and/or investing in new equipment.
Themerchant barmarket also saw a lackluster response to the price increase, with some distributors filling holes in their inventories even though their customers did not, preferring to buy on an as-needed basis. The main source of end-use demand formerchant barcontinues to be agricultural equipment-as the agricultural season soon comes to a close, equipment manufacturers will use the downtime to bulk up their stock for next spring. And according to theUSDepartment of Agriculture (USDA), domestic farmers will have funds to invest in new equipment; earlier this year, the USDA forecasted an 8 percent increase in farm cash income in 2010.
As forrebar, inventory restocking was a moderately active in that particular market, but overall, reaction to the price increase has been just as tepid as other long products. Manyrebarinsiders predict that even ifscrapincreases again next month, there is a strong possibility that mills will not increaserebarprices to match, if they raise prices at all. Althoughconstructiondemand will potentially improve sooner rather than later, it might not happen by the time Septemberscrappricing is announced.
Pipedemand in theUSon the other hand (OCTG in particular), has been rather steady, mostly due to increasing rig counts, even though quoting activity has been slow the past several weeks. OCTG has experienced a healthy 2010 comparative to otherpipe行业;不过,交易员的成功在春天ay actually hinder their ability to make further bookings over the next couple months (and perhaps for the remainder of this year).
In theflatsdepartment,USplatemills have followed the uptrendingscrapmarket, informing customers that the steel they purchased yesterday is no longer available at the previously transacted price. However, while some remain somewhat skeptical as to the stickability of the newly revised offerings, others are more optimistic, pointing out that of all of the products under theflatsblanket,platemay be the best suited for price recovery.
As for domestic hot and cold rolled coil (HRC and CRC), purchasers have been doing a lot of finger crossing this past week, hoping that short lead times and sustained oversupply will not put a damper on newly uptrending prices for steel. "Activity is still not good," commented one trader. "While some mills may have started reducing turns, they haven't cut back a whole heck of a lot, and the current level of demand is not enough to exhaust current production levels." The general consensus, however, is that price increase announcements needed to happen in order to quash the downward pricing momentum, and it's strongly believed that additional increase letters will be released for October, which could very well induce an additional flurry of fear-based order placement. The question, though, is if this fear-factor of continued upswings will be enough to continue the current stabilization within theflatssector.
The domestic HDG market remained relatively stable after the $1.00 cwt. price increase announced two weeks ago, and mills are continuing to make a strong play for full acceptance of the $2.00 cwt. increase announced earlier this week. While some whistle an optimistic tune about prices no longer being on a downslide, others still point out that demand has not really improved, stating that while it's believed that the "bleeding has stopped" that the sideways pricing move may only prove to be temporary and could be susceptible to another dip, at least until demand and production capacity find themselves more on par with each other. As of end of business on Monday, August 16, there was no indication by any mill that further production curbing, to match demand, was taking place.