The pricing trend for US domestic rebar is still strongly up due to the continued lack of imports as well as the expected increase in US shredded scrap prices.
With shredded scrap expected to rebound in July, US rebar mills will undoubtedly raise their scrap surcharges accordingly. With the lack of import tons in the market, the domestic mills will have no problem pushing through a moderate increase, and they may even announce an additional increase to their base prices as well.
It is important to remember, however, that end-use demand for rebar in the US is not that promising. Domestic mills are currently busy, and should be able to continue raising their prices, possibly for another several months; however, were it not for the weak dollar keeping out rebar imports, domestic mills would have a harder time getting orders. The chance of a rebound for the deepening housing slump in the near future is looking very bleak - a recent study from Harvard University noted that housing starts, new home sales and existing home sales are at all-time lows since World War II, while home price declines and mortgage defaults are the worst on record. The market will not recover until the excess housing supply is absorbed, the report said, and the weak economy, tight credit markets and uncertainty over when the market will bottom out are all factors which are delaying absorption.
Also, not all areas of the US are experiencing the same level of import penetration, so certain markets are not as tight as others. Certain regions of the country that have seen hardly any imports in recent months, like the Midwest, are seeing especially tight rebar markets, though other markets that have more imports, such as the Gulf area, are seeing more subdued demand.
Still, despite the slow demand from the housing sector, the US rebar market, overall, remains tight and should remain so as long as the import price remains higher than the domestic price. Currently, most domestic rebar offers still range from approximately $49.00 cwt. to $49.50 cwt. ($1,080 /mt to $1,091 /mt or $980 /nt to $990 /nt) ex-mill for July shipments.
Traders are still offering their material at a range of $52.00 cwt. to $54.00 cwt. ($1,146 /mt to $1,191 /mt or $1,040 /nt to $1,080 /nt) FOB loaded truck in US Gulf ports. The pricing trend for these import offers remains strongly up; once US mills announce their next price increase, traders are expected to raise their numbers by a similar amount.
Also driving the import pricing trend upward is the fact that there are still no major orders being booked from foreign mills. Only small Mexican and Japanese offers are being booked, and there are still no new orders from Turkey. Mexican offers continue to range from $54.00 cwt. to $55.00 cwt. ($1,191 /mt to $1,213 /mt or $1,080 /nt to $1,100 /nt) delivered to the Gulf.
Recently released Preliminary Census Data from the US Import Administration show that in May the amount of rebar that the US imported from foreign countries dropped drastically. Rebar imports in May totaled 50,737 mt, down from the 157,383 mt imported in April, and also down significantly from the May 2007 total of 218,161 mt. In May 2008, the US' largest sources for import rebar were: Mexico, at 40,136 mt; followed distantly by Turkey, at 4,976 mt; Dominican Republic, at 1,884 mt; Japan, at 1,768 mt; and Canada, at 1,490 mt.