Russian rebar market

During the last week Russian domestic price for rebar grew by about 9 percent. This is an absolute record of the rate of increase in the price of rebar for the entire history of Russian domestic market of ferrous metals. Moreover, both the users and analysts awaiting the continuation of rebar price rise and of other steel products. This forecast can be justified by the fact that in the second quarter of 2006 the internal Russian prices for steel products rose in average 25 percent compared to the first quarter. Moreover this upward tendency in the prices does not show any signs of slowing down. Apart from demand, which is very high for rebar in Russia at the moment due to construction boom, the scarcity of the material pushes the prices even more up. In total of 2005, the share of rebar in overall Russian production of long products increased only from 10.1 percent to 12.9 percent, that is approximately 3.65 million metric tons, year on year, whereas the needs of the domestic market is estimated as minimum in 3.9 million metric tons for the current year. The problem of underproduction of rebar by Russian producers lays in the essence that rebar is not a priority product for the Russian steelmakers. There are only few big rebar producers who are controlling the market and therefore can manipulate the prices. Due to the scarcity of this material in the domestic market, its price already overcome the US and European prices. The main users of rebar in the Russian market, construction companies, believe that the continued price rise would inevitably lead to rise in the prices of real estate. Although prices for, widely used in construction, rebar type A500C does not show such aggressive rise as that for A-3, construction companies are definite that they will not wait for long for the same tendency to begin. According to Vyacheslav Timerbulatov, the Vice President of group of companies Konti, the price rise for rebar would have a negative effect on the cost of ’square meter', since the dynamics of the cost of square meter is directly proportional to an increase in expenditures of construction companies.