US rebar market – Traders struggle with low spot prices, high replacement costs

Thursday, 18 October 2007 11:41:41 (GMT+3)   |  
       

Import rebar offers from the US' main foreign rebar source, Turkey, have remained stable since Turkey returned to the market this week after the religious holiday marking the end of Ramadan, with Turkish producers hoping that the sluggishness in rebar prices will dissipate soon.

Most new import rebar offers for future delivery still range from $29.00 cwt. to $30.00 cwt. ($639 /mt to $661 mt or $580 /nt to $600 nt) FOB loaded truck, in US Gulf ports, with the exception of Mexican offers which stand at approximately $28.50 cwt. ($628 /mt or $570 /nt) FOB loaded-truck. Most new offers for Houston delivery are for January arrivals, as traders want to avoid end-of-the-year taxing of their inventories and therefore don't plan to replenish them until next year.

Spot market prices for import rebar inventories on the ground are currently being negotiated at prices less than the replacement costs. Also, inventories that are currently being offered most likely cost more than what they are now being offered for. With spot prices lower than both their purchase and replacement costs, traders are hesitant to accept lower spot prices, although the year-end is approaching fast and the most-dreaded Harris County inventory tax is looming over dealers' heads. 

With Turkish rebar prices generally trending down in recent weeks, there is some interest gathering for first quarter deliveries, though very few concrete purchases are taking place yet. Most buyers are still surviving on their inventories and are hoping for Turkish prices to come down further. But with the continuing escalation of ocean freight rates and high scrap prices, Turkish offers may have already reached their bottoming-out point.

The other usual import rebar sources - Taiwan and Japan - are still offering to the US at prices too high to gain any buying interest, especially on the US West Coast, their main US market. 

The West Coast rebar market is experiencing similar conditions to the rest of the country, with import prices remaining high and only a small gap existing between the domestic and import prices. Inventories are on the high side, while demand has slowed down some - which is no surprise considering the busting housing market.

On the domestic side, as announced Tuesday, Nucor will maintain its rebar prices stable in November, keeping both rebar base prices and the raw material surcharge (RMS) applicable to rebar flat. Rebar distributors were glad to hear this news and are hoping for shredded scrap prices to maintain their strength so that rebar prices can stay stable next month despite the usual end-of-the-year slowdown in demand.

Through November, domestic rebar prices will continue to range from $30.90 cwt. to $31.40 cwt. ($681 /mt to $692 /mt or $618 /nt to $628 /nt) FOB mill. The domestic pricing trend is stable.


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