With US cut scrap prices expected to fall in August and the world rebar markets weakening, the upward price momentum in the US rebar market has slowed to a halt.
SteelOrbis is hearing this week that the scrap price decrease this month could be pretty sharp. Most likely, it will not be significant enough so that rebar mills have to lower their numbers. If shredded scrap doesn't decrease more than $60 /nt, Nucor and other rebar mills should be able to hold their prices for at least another month. Then again, some scrap dealers are predicting that the price drop for cut grade could be as steep as $100 /nt.
For now, domestic prices range from approximately $52.25 cwt. to $52.75 cwt. ($1,152 /mt to $1,163 /mt or $1,045 /nt to $1,055 /nt) ex-mill. This price range is an average including the extras the mills are charging for 20-foot rebar. #3s are fetching extras between $3.00 cwt to $5.00 cwt. depending on region and customer.
On the consumption side, end-use demand for rebar in the US remains relatively weak, though the lack of rebar imports is helping to keep the market stable. Some mills are rolling more #3s, which reduces their productivity but keeps them busy. If mills are decently busy, there will be less pressure on them to lower prices. The shortage of #3s in the market is starting to disappear, though.
The import rebar market is now trending slightly down, with traders narrowing the range they are offering at to a level of $52.00 cwt. to $53.00 cwt. ($1,146 /mt to $1,168 /mt or $1,040 /nt to $1,060 /nt) FOB loaded truck in US Gulf ports. It is unlikely, however, that we will see prices fall further just yet since there are no new back-to-back offers lower than $52.00 cwt.
There are some imports still coming from Mexico and Japan, though still not in great quantities. Mexican mills have lowered their prices, though, to a range of $52.50 cwt. to $53.50 cwt. ($1,157 /mt to $1,179 /mt or $1,050 /nt to $1,070 /nt) delivered to Texas and sometimes farther inland without charging much more. The Mexican mills tried to raise their prices too fast, and their numbers have now fallen back to earth. Deliveries are also very prompt, indicating that mills have built up some floor stock.
Import license data for July show an increase of rebar imports in July, at 87,906 mt, from June (60,723 mt) and May (51,307 mt), though imports remained well below the July 2007 total of 264,191 mt. The most import licenses for rebar in July came from: Mexico, at 34,026 mt; Japan, at 25,668 mt; Turkey, at 17,641 mt; Dominican Republic, at 9,068 mt; and Germany, at 363.7 mt.
To answer the question posed by this article's title, though the pricing trend for domestic rebar is only neutral at best, mills still do not have much import competition, and even if demand is weak, they won't get more orders by lowering their numbers. Therefore, mills have a strong incentive not to lower their prices even with a moderate drop in raw material costs. But again, if the scrap price drop is very pronounced, mills would have a hard time justifying to customers why they are keeping their prices so high since they cited raw material cost increases as the reason behind all of their price increases this year.