Fastmarkets’ monthly assessment for steel bar hot-rolled special bar quality (SBQ) 1-inch round 1000 series (carbon), fob mill US was $62 per hundredweight ($1,240 per short ton) on Friday January 20, up 2.90% from $60.25 per cwt on December 16, and up 3.33% from $60 per cwt on November 18.
Fastmarkets’ monthly assessment for steel bar cold-finished 1-inch round 1018 (carbon), fob mill US was $83 per cwt on Friday, rising 1.53% from $81.75 per cwt on December 16, and up by 1.84% from $81.50 per cwt on November 18.
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Market overview
The rising cost of scrap and other raw materials is the key driver of higher prices amid a first quarter rebound, according to market participants.
Fastmarkets’ steel scrap No1 busheling, indicator, delivered Midwest mill, which stood at $360 per gross tonne for most of November, had increased 25% to $450 per tonne by January 5, where it has remained.
In addition, Nucor added a silicon surcharge for most SBQ products in December ranging from $0.29-$0.43 per cwt, effective for January 1 shipments. For shipments effective February 1, the silicon surcharge ranges from $0.20-$0.40 per cwt for most products.
While the market has rebounded, the increase in business is not as robust as some market participants expected.
“We have seen decent hot-rolled SBQ demand, but not booming,” a southern distributor said.
“The hot-rolled SBQ mills are still doing okay but have started to see the signs of market slowdown that could lead to problems down the line if some of the main industries don’t start picking up like auto, heavy equipment, oil and gas,” the southern distributor said.
A mill source said that “shipments [for hot-rolled SBQ] are much improved” and lead times “have fallen considerably, to seven to eight weeks.”
“The tricky thing is that there is still less SBQ capacity than 3 years ago. Nobody is making any mention of price in the tight supply situation,” the mill source said.
“We are still under the allocation structure because it helps us plan better, even with better availability,” the mill source said.
Double bookings that were placed with mills last year when supply was tighter “have all finally cleared the markets in recent months; we’re now seeing truer demand,” the mill source said.
A northern distributor that buys hot-rolled SBQ agreed with the mill source’s view. “Lead times have come in with some suppliers. It’s easier to insert an order now than it has been in the last year.”
It seems that demand has slowed, as there isn’t that frantic need for steel so far in January
Even so, the northern distributor was cautious. “It seems that demand has slowed, as there isn’t that frantic need for steel so far in January.”
A midwestern distributor described demand as “soft” but still with “extended lead times for hot-rolled SBQ well into July.”
By contrast, lead times for cold-finish SBQ remain at four to six weeks, the midwestern distributor said.
Meanwhile, demand has pushed ahead for cold drawn SBQ, according to the southern distributor.
“One of my cold drawn mills said they were slow the first week of the year, but since then it has taken off,” the southern distributor said, noting that many are trying to get material from the mills before the $60 per tonne increase in scrap affects price levels, starting with February 1 shipments.
The recent price surge in scrap, however, may be temporary, according to the southern distributor. “I did hear this week that scrap might be losing its steam for February, so any push for shipping tons out will be limited if that news gets around.”
A second mill source said that there has been “a pretty solid start to the year” and “shipments are good” for cold drawn products.
“There are some markets that are still destocking, but overall our business is strong,” the second mill source said.
While oil and gas equipment industry buyers have ramped up inventories in the last few years and are “going through destocking,” companies in this sector “anticipate a strong 2023,” the second mill source said.
Agriculture is particularly robust and “continues to be our bell cow right now,” the second mill source said, meaning that it leads overall demand for SBQ.
A third mill source was more cautious. “It’s surprisingly quiet for January” for cold drawn mills.
A northeastern distributor that buys cold drawn SBQ was also cautious about demand but still robust enough for mills to maintain their pricing leverage. “Overall demand is down about 5% so the [continuing] tight market conditions are a result of reduced supply.”
The northeastern distributor expects mills to announce a base price increase for SBQ “as soon as March 1” because buyers have worked through the excess inventory accumulated last year.
For a deeper dive into the factors driving volatility in the US SBQ market, register today for our free webinar US SBQ market: Drivers of volatility on February 23, 2023, at 10 AM Eastern time.
