Scrap may throw wrench in US rebar price trend

The pricing trend for US rebar is still generally up, but the market’s momentum has slowed, as the price of shredded scrap is expected to decrease slightly this month.

Most domestic rebar offers are stable since last week at a range of $26.00 cwt. to $26.50 cwt. ($573/mt to $584/mt or $520/nt to $530/nt) ex-mill, although the announced price hikes for January and February would put offers at least $1.00 cwt. higher than this level if they were enforced in full.. US mills in the West Coast have been more successful in getting their prices up, as opposed to rebar firms in the Midwest and the Gulf that are suffering from sluggish business.

Demand remains weak due to a lack of construction projects on the horizon. Just weeks ago, construction companies lauded stimulus spending as the one bright spot in the industry, but the US government issued a budget proposal February 1 that announced a freeze on “non-security domestic discretionary spending”, including most federal construction programs. With the commercial and residential sectors also remaining depressed, industry insiders predict that construction will not pick up much until the second half of 2010, going into 2011.

In addition to the generally slow demand for rebar, US shredded scrap prices are expected to trend sideways to slightly down this month, which will likely prevent US rebar mills from announcing further price increases in the near term. And after prices stop rising, there is always the concern that once the momentum is lost prices will start to drop again. For now, mills are still trying to keep their prices up. If scrap prices fall only slightly (less than $10/long ton) as expected, mills are likely to counteract the drop with a rise in base prices to keep net prices stable in March.

Current import rebar offer prices for the US are still encountering some resistance, as more competitive domestic prices result in few import bookings. Mexican offers are stable since last week at a range of $26.00 cwt. to $27.00 cwt. ($573/mt to $595/mt or $520/nt to $540/nt) delivered to US border states. Mexico remains the only competitive import source, but not by much of a margin from domestic offers. Overall, Mexican mills are still somewhat bullish, though this may change if US scrap prices come down.

Meanwhile, Turkish offers are still not attractive, but that could change as scrap costs in the region came down in the past couple weeks.