SJF's Material Handling Blog
With the worldwide financial crisis showing no signs of abating and the US headed into what many analysts predict will be a long recession, there is not a great deal of hope that the global steel markets will see a speedy recovery. However, the outcome of the historic US presidential election underway Tuesday will certainly have at least some effect on the direction of the US economy and, directly or indirectly, on the steel markets. As a major rebar distributor in the US told SteelOrbis this week, “The presidential election will definitely have an impact on the market, but how much of an impact is unclear.”
With US shredded scrap prices falling below Nucor’s $162/nt scrap surcharge baseline, the domestic rebar leader has a tricky decision to make about how they want to handle their next pricing move.
Nucor’s raw material surcharge (RMS) for long products, first instituted several years ago to reflect the then-rising scrap costs, has a Program Baseline of $162/nt, which was the price of shredded scrap when the surcharge was first put into place.
The RMS, which is usually adjusted on a monthly basis when scrap prices are rising or adjusted more frequently when scrap prices are dropping, is based on the difference between current scrap prices and the program baseline. Although scrap prices have risen and fallen numerous times in recent years, they have remained well above the $162/nt ($179/mt or $8.10 cwt.) baseline – until now. In the last month, shredded scrap has lost almost half of its value, tumbling down to the current level of $125/long ton.
An announcement from Nucor is expected in the coming days, and since there is no precedent for this situation, it is not clear yet what the industry leader will do. Rather than applying a negative surcharge, however, (based on the current formula, the RMS would be minus $37/nt) it is more likely that Nucor will eliminate the RMS, at least for the time being, and lower its base prices instead. Scrap surcharges, once put in place to help producers recover their high raw material costs, are now doing the companies more harm than good as scrap prices have plummeted. If the company does indeed get rid of the RMS, for the first time in a long time the base price will be the same as the transaction price.
Currently, domestic rebar mills are offering at a range of $37.50 cwt. to $38.00 cwt. ($827 /mt to $838 /mt or $750 /nt to $760 /nt) ex-mill. Based on the additional $75/long ton that scrap prices have fallen this month, Nucor and other domestic rebar producers are expected to lower transaction prices (whether it be by lowering base prices or applying a negative RMS) by a total of $75/nt ($83 /mt or $3.75 cwt.), bringing most offers down to around $34.00 cwt. ($750 /mt or $680 /nt) ex-mill.
On the import side, offers are still substantially lower-priced than the offers from domestic mills. Import offers from Turkey have dropped by about $2.00 cwt. in the last week to a range of $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) duty-paid, FOB loaded truck, in US Gulf ports. Although there are some indications that scrap prices in Turkey are finally bottoming out, the pricing trend is still down due to the weak demand. Import offers from Mexico are slightly above the Turkish price, with most offers ranging from $29.00 cwt. to $30.00 cwt. ($639 /mt to $661 /mt or $580 /nt to $600 /nt), delivered to Houston.
I thought regular readers of this blog might enjoy this article. MMH has recently performed a customer satisfaction survey of lift trucks. They compiled the results into several categories such as overall satisfaction, product quality, value, etc. The results were recently tabulated and briefly listed on their site. The full report will be available in November.
Just quick heads up –
The new world material handling equipment market report has been released and is now available. The good news is that it’s predicting a growth in demand of 5% or more by 2012.
From the report:
The world market for material handling equipment and systems is projected to increase more than five percent per year through 2012 and exceed $120 billion (including price increases). Generally healthy economic conditions will support gains in global material handling demand, especially in rapidly developing areas such as China and India, where rising manufacturing output and fixed investment will fuel growth. The advanced nations of North America, Western Europe and the Asia/Pacific region (i.e., Australia and Japan) comprise relatively mature markets for material handling. A healthy economic outlook coupled with a pickup in fixed investment will support material handling demand in the US, while expanding manufacturing output will support gains in Japan and Western Europe.
I’d like to take a minute to introduce readers of this blog to a friend of mine in the blogosphere and a fellow Minnesota material handling company. DJ Products is a Minnesota based ergonomic material handling products company whose line of motorized carts is well known in many industries. They offer a full line of push carts, a power mover, a tugger, a trailer mover and other ergonomic powered carts to fit a variety of needs within a number of specialized industries.
Their products range from pulling and pushing industrial carts, hospitality & hospital carts and shopping carts all the way to pulling, pushing and moving cars, trucks & trailers. Needless to say, these carts have some serious power.
In addition to their product line, Jeff authors an industry material handling and ergonomics blog that is full of great tips, industry specific information, case studies and more. I can highly recommend this blog as an excellent resource for material handling and logistics information.
So do yourself a favor and add this one to your reading list. You wont regret it.
Okay – I’ll admit it, this post is a shameless plug for our online store, but I think you’ll agree that these products are both unique and in the right situation, very useful. So…without further delay – here they are.
In September, US scrap market insiders are expecting a major drop in prices. In some regions of the country, scrap prices have already started to decline in recent days. Shredded scrap prices could fall by as much as $155 /lt to a level of around $400 /lt; while HMS I is expected to drop by around $145 /lt to the level of $300 /lt.
The huge price drop is mainly due to the weak export market,. Turkey, which is traditionally the leading scrap importer from the US, enters the month of Ramadan at the start of next week along with the Middle Eastern countries, and, therefore, foreign scrap demand may continue to be slow in September. The market is still looking for equilibrium, so prices are expected to settle more next week with the new pricing levels becoming more apparent. Source: SteelOrbis.com
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