The internal struggle within the Mexican longs market continues, as mills have once more tried pushing prices up, yet buyers remain very reluctant to buy at higher prices while demand continues to languish at weak levels.
This week, some Mexican mills have further increased their domestic rebar prices to at least Peso 8,700/mt (US$655/mt) and have raised wire rod prices to about Peso 9,000/mt (US$678/mt). Furthermore, Mexican longs mills are also increasing their prices for exports to the US. SteelOrbis obtained a price letter issued by Mexican longs producer DeAcero this week which advised US customers that due to rising raw material prices, the firm will adjust its prices, effective September 15th, upward by two to five percent, depending on product line.
However, despite mills' price hike attempts, the Mexican domestic longs spot market has yet to rise to mills' desired price levels. Most transactions in the domestic Mexican rebar market continue to range from about Peso 8,000 to 8,200/mt ($US603 to $618/mt) delivered, plus taxes. Domestic low carbon wire rod transaction prices in the Mexican market are also unchanged from last week and range from Peso 8,500 to 8,800/mt (US$640 to $663/mt) delivered, plus taxes.
Furthermore, buyers still have the power to negotiate prices down as many distributors continue selling at cheaper prices due to higher inventories. The strike at ArcelorMittal's Lazaro Cardenas mill continues, and it seems the firm's executives are in no rush to resolve their union problems and resume normal operations, perhaps due to the weakness in the marketplace. The firm has said that despite the strike's effect on production, it has been able to continue delivering all orders to customers and will continue to do so. If the mill runs out of inventory, ArcelorMittal management plans to ship product from its other plants in the Americas to fulfill orders.
On the positive side, on Wednesday Mexico's Institute of National Funds for Social Housing (Infonavit) announced that its special program to aid workers to purchase homes has picked up speed in the last three months. "From June 1 to August 23, 115,739 mortgages were formalized, which represents an increase of 3.3 percent when compared to the same period last year," explained Víctor Manuel Borrás Setién Infonavit General Director. He added that the pace of activity is expected to intensify during this year's Q4, and it should be possible to reach the annual goal of 500,000 mortgages.
For now, the overall trend in the Mexican longs market continues to be sideways as demand is still not strong to justify any major price increases. And even with public works programs continuing to provide some demand from the construction sector, private construction will also need to increase before demand will see a significant recovery.