The import rebar market in the US seems to be firming up, as inventories are slowly shrinking and prices seem to have, more or less, bottomed out. At the same time, there are no indications of any major improvement in end-use demand.
In recent weeks, rebar traders in the US have booked a good amount of orders from Turkish mills. Based on the slowly increasing price expectations from Turkish mills, traders seem to be calculating that prices have just about hit bottom and will soon start trending up again.
On the ground in the US, traders say that they are slowly moving tons, though in many cases at a loss. Still, there is some buying activity, as both fabricator and distributor inventories are getting slimmer. On the other hand, there has not been any revival in end-use demand, as the credit crunch and weak economy, not to mention the cold winter weather in much of the country, continue to depress the construction markets. And while the weather will undoubtedly improve in the coming months, the economic conditions are not expected to improve anytime soon. Therefore, customers are hesitant to keep much inventory and are still only buying for immediate needs. Ports in Houston are reporting historically low rebar inventories for this season.
Although the overall pricing trend for import rebar is now slightly up, prices have generally trended sideways since last week, with most new offers from Turkey continuing to range from about $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt or $490 /nt to $510 /nt) duty-paid, FOB loaded truck in US Gulf ports. After rising by about $1.00 cwt. last week, this week Mexican offers have also remained stable, with most offers ranging from $25.50 cwt. to $26.50 cwt. ($562 /mt to $584 /mt or $510 /nt to $530 /nt) loaded truck in Houston.
Still, even with import prices looking to be bottoming out, given the lack of demand in the market, import rebar continues to pose a threat to the domestic industry in terms of market share. License data collected through January 21 from the US Import Administration already show a big up-tick in permit applications for import rebar in January compared to recent months. January import rebar licenses reflect 56,930 mt so far, compared to only 16,082 mt for the full month of December and 22,780 mt in November. Most of these new licenses are from Turkey, which accounts for 32,348 mt so far in January, compared to less than 1,000 mt last month.
On the domestic side of the market, as expected, Nucor officially announced late last week it would keep rebar prices stable in February. Domestic prices, still being several dollars per hundredweight higher than import offers, are expected to continue on a neutral trend in the near future, though there are still some private deals made on a case-by-case basis at bargain rates that are closer to import prices. On the whole, most domestic rebar offers continue to range from approximately $27.00 cwt. to $27.50 cwt. ($595 /mt to $606 /mt or $540 /nt to $550 /nt) FOB mill.
This week the US swore in a new president who has vowed to take swift action on the economy during this rough time for the nation, which he referred to in his inauguration speech as the "winter of our hardship." As previously reported, part of President Obama's economic recovery package will include investment in infrastructure to the tune of $90 billion, as the bill stands now. Construction-related steel products such as rebar will undoubtedly benefit from such a package, although some are disappointed that more money was not allocated towards infrastructure. Nevertheless, while only comprising a little over a tenth of the entire stimulus package, $90 billion is still a significant sum of money. The market is unlikely to see any major benefits from it until much later in the year, however.