The combination of low inventories and near certainty of another scrap increase has led to a purchasing spike in the domestic rebar market.
Over the last few months, the instability in shredded scrap pricing (up $28/long ton in September, down $30/lt in October and back up $20/lt in November) led many rebar distributors to run down their inventories until the situation became more clear. But the seasonal scrap shortage in the winter months all but guarantees prices increases in the near-term, and already, predictions of December scrap pricing surpass the November increase, which has motivated many rebar buyers to get off the fence and stock up to try and beat further rebar price increases.
This marked increase in purchasing activity has indeed firmed up domestic rebar spot prices, which were at a low of $28.00-$29.00 cwt. ($617-$639/mt or $560-$580/nt) ex-mill just last week. Most spot prices are now reported in the range of $29.50-$30.50 cwt. ($650-$672/mt or $590-$610/nt) ex-mill, and when the December price increase goes into effect, mills might not have that much trouble getting prices closer to their official asking range, which is currently around $31.75-$32.25 cwt. ($700-$711/mt or $635-$645/nt) ex-mill. While it's still too early to tell whether the asking prices will fully incorporate the $1.00 cwt. ($22/mt or $20/nt) increase after the December 1 effective date, there is a strong possibility that mills will respond to a December scrap hike with another rebar price increase. The likelihood that buyers will accept such increases is also strong--remarkable considering that for the first time in quite a while, prices are being partially determined by demand instead of primarily raw material costs.
However, this upward trend has tightened the availability of domestic rebar, and certain regions in the US might look to imports to fill in holes. Mexican mills have been reportedly cutting deals lately, by around $0.50 cwt. ($11/mt or $10/nt) less than their current asking price of $28.75-$29.75 cwt. ($634-$656/mt or $575-$595/nt) duty paid FOB delivered to US border states. However, those deals might dry up once Mexican mills get wind of the strengthening US market.
Turkish mills, on the other hand, finally raised their prices after weeks of holding steady amid rising raw material costs, but their relatively high prices are still not garnering much interest in the US. Turkish rebar offers are approximately $0.50 cwt. higher than last week, bringing prices into the range of $30.25-$31.25 cwt. ($656-$678/mt or $595-$615/nt) duty paid FOB loaded truck in US Gulf ports.