US rebar prices continue to slide this week, as shredded scrap prices have decreased further and it is not yet clear when the market will bottom out.
Despite last week's significant raw material surcharge (RMS) drop, which caused prices to decline by $130 /nt, the rebar market has yet to show signs that prices are nearing the bottom.
There is no official announcement yet, but already, domestic rebar mills are selling at lower than last week's indicated prices. This week, on average, rebar prices decreased by approximately another $1.00 cwt. ($22 /mt or $20 /nt) from last week, with most domestic rebar offers now ranging from approximately $38.75 cwt. to $39.25 cwt. ($854 /mt to $865 /mt or $775 /nt to $785 /nt) ex-mill. Moreover, SteelOrbis has learned that there are isolated deals taking place at even below this range.
Although Nucor lowered prices to reflect the "bottoming out of the scrap market" last week, scrap prices continue to decline. Shredded scrap prices fell a total of approximately $45 /long ton since Nucor's price announcement last week. Shredded scrap is down $175 /long ton this month.
Mexico continues to be very competitive with its import rebar offers to the US. While the average US domestic rebar price declined nominally, Mexico's import offers to the US declined by approximately $4.00 cwt. ($88 /mt or $80 /nt) since last week to the range of $32.00 cwt. to $34.00 cwt. ($705 /mt to $750 /mt or $640 /nt to $680 /nt) delivered to Houston. This range is also valid for import offers from other traditional sources such as Turkey, Taiwan and Japan (for duty-paid, FOB loaded truck, in US Gulf ports). However, with the mills getting increasingly desperate, the pricing trend for both domestic and import rebar is significantly down.
The latest Census Data from the US Steel Import Monitoring and Analysis System (SIMA) show that total tonnages of import rebar arriving in the US during August were 75,503 mt, which is 3,805 mt less than the 79,308 mt imported in July. The largest quantities of import rebar in the August period came from: Mexico, at 37,617 mt; and Japan, at 35,293 mt. Other smaller rebar sources during this period included the Dominican Republic, Canada and Germany.
Rebar buying activity is stagnant right now. A rebar distributor told SteelOrbis this week, "Demand is off so dramatically. There needs to be a period of stability." In the very few transactions that are taking place, buyers are able to put pressure on distributors to get the best possible deal. Distributors then put pressure on mills, traders and logistics companies to get the lowest possible price. Everyone involved in a possible rebar transaction is feeling immense pressure to negotiate prices down. Rebar deals just aren't very lucrative right now.
Also, traders' and distributors' losses are piling up. Many traders and distributors have gotten stuck with inventories which have devalued. Although inventories are not at very high levels compared to a normal year, prices have dropped so much that even a small inventory constitutes major losses if the goods are sold at the current market level.
Most traders and producers at the SteelOrbis conference and Irepas meeting in which took place in Hamburg, Germany this week expect the price to decline further until the global financial systems are finally stabilized. There may be more bad news ahead of us, but the consensus was that in three to five months, the steel markets should finally find the bottom. Until it does, though, there is going to continue to be a lot of hesitancy and little commercial activity in the rebar market.