As the weak levels of buying activity in the US rebar market have persisted, further price reductions have taken place for both domestic and import rebar in the US.
Any illusion of stability in the US longs markets has certainly been shattered after Nucor's official drop in merchant bar prices this week. The official drop in merchant bar prices as well as the descending scrap prices signal a continuing downward trend for US longs prices in the near term. But while an official price decrease for rebar is probably imminent, it will probably be less sharp than that for merchant bar prices, since the published domestic merchant bar numbers were widely considered to be much higher than the actual spot price. In contrast, domestic mills' official rebar prices are only slightly above the going spot rates. Nevertheless, the pricing trend for rebar is still down due to the continued soft demand and declining US shredded scrap prices.
Although US mills have yet to issue an official price decrease for rebars, spot prices have slipped by about $1.50 cwt. ($33 /mt or $30 /nt) since last week, as a result of deals being conducted at below the published levels. Most domestic rebar offers now range from approximately $25.50 cwt. to $26.00 cwt. ($562 /mt to $573 /mt or $510 /nt to $520 /nt) FOB mill. Deals for mill-affiliated fabricators are conducted at the lower end of this range, or even slightly below it.
However, it is not all doom and gloom for US rebar. President Barack Obama officially awarded this Tuesday the first stimulus-funded highway construction bid -- only two weeks after signing the US economic stimulus plan. He announced that more than 200 highway construction jobs will commence in the next couple of weeks, and that states can immediately begin using their portion of the $28 billion of the stimulus funding dedicated to road and bridge construction. Infrastructure projects such as highway construction have a strong rebar component, and the domestic rebar market should at least see a modest benefit over the next two years.
While the steel industry certainly would have preferred that more of the stimulus funds were earmarked for infrastructure (about $90 billion will go towards infrastructure in total), this fast kick-start in infrastructure spending has helped to quell some concerns as to how and when the stimulus funds will be implemented, and may restore some confidence in the stimulus funds' coming impact on the economy. The effect on direct steel consumption will be relatively minor, but if the stimulus package does its job to reinvigorate the economy, steel, and particularly rebar, could benefit greatly.
Despite the "Buy American" provisions in the stimulus, import rebar will also eventually benefit from US infrastructure spending, since as domestic mills get more busy with government jobs, imports will be able to pick up the slack on the commercial side. But at present, like domestic, import rebar is also trending down. Activity remains very quiet and the speculation of US domestic prices dropping further certainly isn't helping things. Turkish offers continue on a descending slope, dropping, on balance, by about $0.50 cwt. ($10.50 mt or $10 /nt) since last week, with most offers now ranging from approximately $23.00 cwt. to $24.00 cwt. ($507 /mt to $529 /mt or $460 /nt to $480 /nt) duty-paid, FOB loaded truck in US Gulf ports. The US' other main import rebar source, Mexico, is reportedly still not too aggressive and mills are said to be attempting to hold prices firm at the range of $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt or $490 /nt to $510 /nt) loaded truck in Houston; however, given the weakening prices of domestic offers and offers from other import sources, Mexican mills may have no choice but to follow the downward trend.
As for unsold inventories, traders say that there currently isn't a whole lot of material on the ground in the Gulf, though there are a few big shipments from Turkey on the way this month. Still, import rebar arrivals remain at unseasonably low levels. Preliminary Census Data from the US Department of Commerce show that the US imported a total of 49,189 mt of rebar in January 2009, which is less than half of the 115,313 mt imported in the same month of last year.