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US surcharge benchmark drops $10, yet flat prices expected - 10 April 2012

After a couple weeks of shredded scrap prices trending down, the industry benchmark price used to set US scrap surcharges for long products and plate dropped $10/long ton from last month's level.

This reduces surcharges by $10 a short ton for May deliveries of affected products, but mills could offset the decline with base price moves. Long products sources have adopted a wait-and-see attitude, as construction demand has been slower than expected and the scrap surcharge has been static for two months.

“I think (transaction prices) should be flat but you never know what (mills are) going to do," a rebar distributor told Platts Steel Business Briefing, though he does not believe current demand would support higher prices.

Michelle Applebaum, managing partner of Chicago-based Steel Market Intelligence, predicts base prices for beams, merchant bar and rebar will be increased by $10/s.t to offset the surcharge decreases. Her recent report also says that the $40/s.t plate price increase announced for April shipments will likely not stick in the face of the surcharge decline.

A beam trader agreed that transaction prices will likely remain flat for May shipments. “I don’t think a $10 move either way will have much impact on things. With bookings seemingly improving at domestic mills I would not be surprised to see prices inch up soon, but not sure if it will be this month with scrap down a bit," he said. "I think we probably first need to see more evidence that the market is strengthening.”

 

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