Faced with weak demand and slow summer activity, domestic rebar mills are finding it hard to hang on to transaction prices, even though they were officially lowered just last week.
As reported a week ago, domestic mills only decreased transaction prices by half of the raw material surcharge (RMS) decrease, leaving room to further drop prices if needed. While mills haven't made any formal admissions of additional decreases, spot prices have softened since last week, by about $0.50 cwt. ($11/mt or $10/nt). Even though current listed prices are still in the range of $29.50 cwt. to $30.00 cwt. ($650/mt to $661/mt or $590/nt to $600/nt) ex-mill, many transactions are being concluded at a range of $29.00 cwt. to $29.50 cwt. ($639/mt to $650/mt or $580/nt to $590/nt) and possibly lower, depending on order size.
Domestic rebar is considerably negotiable, mostly due to the continued weakness in the construction market. According to recent data from the US Commerce Department, construction of new homes and apartments dipped by 5 percent in June compared to May. However, there is hope on the horizon-overall building permits rose 2.1 percent month-on-month in June, which included a 20 percent gain in multi-family unit permits alone. Although the overall rise in permits is slight, any rise at all can be considered an indication that the housing slump might be coming to an end.
As for imports, Mexican offers have continued to decline in response to softening US rebar prices. Current offers from Mexico are now in the range of $26.50 cwt. to $27.50 cwt. ($617/mt to $639/mt or $560/nt to $580/nt) delivered to US border states, reflecting a $1.50 cwt. ($33/mt or $30/nt) decrease from last week. Additionally, Mexican mills are still dealing with the aftermath of Hurricane Alex, which has affected truck and rail transportation since the storm hit three weeks ago. It is expected that a full recovery in Northeast Mexico's transportation sector will not be seen for another couple weeks.
Overseas, rebar prices have remained relatively stable, even though scrap prices in Turkey increased again this week, by about $10/mt. Although Turkish rebar mills would like to raise import prices, they are under pressure from both Mexican and domestic US competition. Currently, Turkish offers for rebar are still in the range of $28.00 cwt. to $29.00 cwt. ($617/mt to $639/mt or $560/nt to $580/nt) FOB duty-paid loaded truck in US Gulf ports, reflecting a neutral trend.