New Report Preview – Steel Market

Our Advance/Decliner Index rebounded to 78% this week due to strength from our Ex-China Index which climbed back to 79% after falling from 92% to 66% last week due to broad-based strength across most regions.  Most notable was a pickup in Steel Business Briefing’s weekly pricing assessments for European hot-rolled sheet, plate, beams and rebar – with increases most evident for hot-rolled.

As is normal for the Golden Week holidays, our China Index declined from 50% to zero this week with only a single price change reported in the week making the reading meaningless.  However, we have seen a few indications of improved steel pricing in the country in the last few days which is good news for global pricing overall.

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New Report Preview – Steel Market

Led by meaningful increases for rebar (up 131%) and plate (up 65%), January steel imports are up 21% from last month to 2.44 million tonnes, the highest level since last June, according to the Steel Import Monitoring and Analysis (SIMA) licensing program.  We believe that this pickup is already having some impact slowing steel’s recent pricing momentum, as we have seen a smaller price increase for rebar than other longs – $15 versus $30 – and trade press is reporting today that a hoped-for price increase for plate for March is being shelved.

We believe that domestic steelmakers showing sensitivity to these issues – with fighting imports via competitive prices rather than solely relying on trade enforcement a key component to the relative health of the steel market during this latest market downdraft, so this is good to see.

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New Report Preview – Steel Market

According to American Metal Market (AMM), Nucor is raising February transaction prices by the full $30/ton increase in the scrap surcharge for merchant bar (up 4%), wire rod (up 4%) and beams (up 4%), but is reducing base prices for rebar by $15/ton, resulting in a $15/ton increase (up 2%) in transaction prices, undercutting Gerdau’s recently announced $30/ton hike.  AMM cites Nucor’s John Ferriola as saying the smaller hike for rebar was due to an increase in imports, most notably from Turkey.

Nucor raised January prices for beams by $20/ton, rebar and merchants by $30/ton and wire rod by $40/ton.

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New Report Preview – Steel Market

As expected, Nucor announced today a new $290m expansion plan that will lift the company’s SBQ and wire rod capacity by a combined 1 million tons by the end of 2013.

The new capacity will be high value-add and high-margin and will leverage unutilized commodity grade capacity and is consistent with the company’s theme of increased organic growth.

We’re very excited to see Nucor doing this expansion. It’s exactly the company’s sweet spot – Nucor’s roots are in organic growth. The company is leveraging their current platform to expand and add value in their existing operations. These kinds of expenditures are extraordinarily high return and Nucor has been doing a great job of using the current weak environment to expand their value-added footprint.

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