Further weakening has been observed in the US rebar market since last week as buyers are still holding off from purchasing and sellers are becoming ever-more motivated.
Traders and distributors say that customers are not buying right now since they know that prices are going down and they plan to wait and see if prices will bottom out before they have to start purchasing again. Rebar consumption is significantly down as well, so the current inventory levels held by customers, though not overinflated, are sufficient to meet their needs for awhile. Because the bottom of the market is still unknown, it seems like the entire rebar supply chain is in a psychological "wait and see" mode.
More distributors have lowered their numbers in the last week to the new spot price of $48.00 cwt. to $49.00 cwt. ($1,058 /mt to $1,080 /mt or $960 /nt to $980 /nt), and traders have had to lower their offers to this range as well (FOB loaded truck, in US Gulf ports), even though the material they are selling was bought at well over $50.00 cwt. ($1,102 /mt or $1,000 /nt). However, even at these lower prices, customers are not buying. The weakening prices are adding to the anxiety in the market, and some customers are even trying to cancel orders.
One buyer indicated, "If everyone chills for a few weeks, things will stabilize and people will start buying again. But buyers are spooked by the ever-so-fast decreasing prices, so there is virtually no low price that they will make a purchase at."
The continued flow of cheap offers from Mexico is not helping the situation. Mexican mills are now offering at a range of $47.00 cwt. to $48.00 cwt. ($1,036 /mt to $1,058 /mt or $940 /nt to $960 /nt) delivered. Even delivered to Florida, offers are at no more than $48.00 cwt., with the mill eating most of the freight in order to try to drum up some business.
Import statistics from the US Import Administration show that in July 2008, rebar imports remained at seasonally low levels though they rose from the previous month. Preliminary census data show that in July, the US imported a total of 78,817 mt of import rebar, compared to 264,191 mt in July 2007, and compared to 60,723 mt in June. The top import rebar sources in July 2008 were: Mexico, at 34,937 mt; Japan, at 25,668 mt; Turkey, at 17,641 mt; Dominican Republic at 9,468 mt; and Luxembourg, at 876 mt.
On the domestic side, the pricing trend has also turned to significantly down. In addition to the weakening import prices and slow demand, the scrap price decrease for September is expected to be significant. Though mills will probably not decrease their prices by the full amount of the scrap price drop, the decrease to rebar prices will still be significant - most likely $60 /nt or more, as the minimum amount scrap is expected to fall is $120 /long ton. A decrease this large will probably start being felt on the fabricator side as well since fabricators' inventories were bought at significantly higher prices, and yet customers will be demanding lower prices due to the weakening rebar prices.
For now, domestic prices still range from $50.75 cwt. to $51.25 cwt. ($1,119 /mt to $1,130 /mt or $1,015 /nt to $1,025 /nt) ex-mill, and they will stay at this range until the next price change goes into effect. The market should see Nucor's price decision by late this week or next week, as they usually lower prices as soon as scrap prices decrease in order to minimize speculation.