Friday, September 5, 2008    
     
       Beam mills are facing escalating pressure from end users to recognize plummeting scrap prices by adjusting the transaction price downward.  Domestic producers did lower the September raw material surcharge, but offset it by raising their base prices by the same amount.  U.S. beam producers are resisting such pressure so far, however. Mills are attributing the falling scrap prices to "panic selling" on the part of scrap exporters on the east and west coast. The panic is being blamed on Turkey backing out of the U.S. scrap market, leaving excess scrap inventories at coastal ports. Turkey is expected to re-enter the U.S. scrap market the mills say. The only question is when. They contend the rest of the country does not have excess scrap and that beam demand is still strong both domestically and worldwide. They also point out that Russia and the Ukraine have both recently instituted export barriers on scrap, meaning that scrap hungry countries will look to the U.S. to provide the needed feedstock for their mills. Plant shut downs at a couple of domestic beam mills in the next 60 days are also mentioned as reasons not to cut prices at this time. Meanwhile, scrap prices continue to plummet.  No. 1 heavy melt scrap was going for $300 a long ton early this week, down $150 a ton from mid-August. Shredded scrap is now below $400 a ton and No. 1 busheling has dropped below $600 a ton. Mills were reported to be canceling orders if they had not shipped by last Friday, in anticipation of prices dropping further in September. Prices appear to be really heading south today, but information is not clear as to how much as of this writing. You can bet the further scrap prices fall, the more heat the beam mills are going to feel to pass along some relief.
    Steel import permit applications fell 21% in August from July levels, although Chinese shipments jumped 55% according to the U.S. Commerce Department. Meanwhile, weakness in global demand is bringing prices for U.S. Steel imports down, but traders are still reporting few takers. The price differential between foreign and domestic just is not big enough yet to attract a lot of interest. Especially with domestic demand so weak and prices beginning to soften. End users would rather just buy what they need for now rather than commit to a big import buy with so much uncertainly in the market. Should the dollar continue to strengthen , however you can look for import prices to drop further and import activity to increase a bit.
    Negotiations between ArcelorMittal and the United Steelworkers continue into the weekend before their current contract expires on Monday. Everyone, including Arcelor's competitors have begun making preparations for a possible strike. 
    
(See Market Report-next column)