Low inventory levels and speculation of a sideways to slightly up scrap trend point to a potential increase in US rebar prices for October.
Although spot prices for US domestic rebar have not moved in the last week, there is a growing sentiment that mills might try to lift up transaction prices for October shipments. Sources tell SteelOrbis that distributor inventories are low, along with scrap inventories--which could possibly push up shredded scrap prices next month by as much as $10/lt. Typically, a $10/lt increase in raw material costs would not be enough to justify a transaction price increase, but US mills apparently view the current rebar market as amenable to a minor price lift, by approximately $1.00 cwt. ($22/mt or $20/nt).
However, not all market insiders share this view; others think mills are wise enough to not try for a transaction price increase until scrap pricing moves up more significantly in the late fall/early winter. Spot prices, on the other hand, could very well continue ticking up at irregular intervals, by $0.25-$0.50 cwt. ($5.50-$11/mt or $5-$10/nt) at a time. For now, US domestic spot prices are still in the range of $35.00-$36.00 cwt. ($772-$794/mt or $700-$720/nt) ex-mill.
Import rebar prices are also expected to follow an imminent upward trend. Offers from Mexico have not changed in the last week, but sources say that Mexican mills will likely raise prices for October shipments, especially if US mills do the same. Current offers from Mexico are still in the range of $34.00-$35.00 cwt. ($750-$772/mt or $680-$700/nt) DDP loaded truck delivered to US border states, but for at least one destination in particular, that price is not the whole story. According to one Midwest rebar distributor, Mexican mills are charging a $0.50 cwt. surcharge on rebar shipments to major import hub Houston, taking advantage of buyers' preference for Mexico's quick delivery times and the fact that overseas rebar shipments have dropped off this month (according to the US Steel Import Monitoring and Analysis System, there have been no rebar imports to the US from Turkey so far in August, while Mexico has been the source of 20,932 mt). While there is no stated end-point for the surcharge, there is a good chance it will be rescinded in early 2012, when large shipments from overseas are typical.
For now, however, Turkish rebar offers continue their months-long trend of unattractiveness, and even though offer prices are in the range of $34.50-$35.50 cwt. ($761-$783/mt or $690-$710/nt) DDP loaded truck in US Gulf ports, there is speculation that they could raise prices in the near-term, based on the local uptrending Turkish rebar market. US traders say that interest in overseas rebar is nonexistent right now, mostly because US buyers are purposefully maintaining lean inventory levels, and when they decide to stock up, it will be on a quick-delivery basis with US domestic sources or nearby Mexican sources instead.