Softness in US rebar market persists as distributors rush to liquidate stocks

Thursday, 28 August 2008 17:02:21 (GMT+3)   |  
       

Following the downward pricing trend of rebar in the US, offers from distributors have become a lot more aggressive.

In an attempt to liquidate inventories before the market price drops further, some distributors are now selling rebar in the US at a level of $48.00 cwt. to $49.00 cwt. ($1,058 /mt to $1,080 /mt or $960 /nt to $980 /nt). These distributors have old inventories bought at lower numbers, so they are able to still get a profit at this price level and eliminate the risk of holding inventories in a weakening price environment. However, in the process, spot prices register significant decreases.

Mexican mills have also lowered their prices for the US to the range of $48.00 cwt. to $49.00 cwt. ($1,058 /mt to $1,080 /mt or $960 /nt to $980 /nt) delivered, as their home market continues to weaken.  Even better deals can be found for the right tonnage and immediate delivery. 

Some traders, on the other hand, are trying to resist lowering prices as their last purchases were well over the $50.00 cwt ($1,102 /mt or $1,000 /nt) level. Even though there are also still unsold positions coming from Japan and Mexico, the volume of these positions is not significant. But depending on how long the current downtrend in the market lasts, this material may stay at the ports for a while once it arrives, or it might be just unloaded at the prevailing spot prices at a loss. For now, most traders are offering in the range of approximately $50.50 cwt. to $51.50 cwt. ($1,113 /mt to $1,135 /mt or $1,010 /nt to $1,030 /nt) FOB loaded truck in US Gulf ports.

It is noteworthy, though, that despite the current soft trend, import rebar arrivals this year have remained at low levels compared to last year. Though more import material has started arriving since the market began softening this summer, the overall tightness of inventories should at least keep prices from taking too great of a fall. Preliminary Census Data show that rebar imports totaled 78,817 mt in July 2008, compared to 264,191 mt in July of last year. In July 2008, the most imports came from Mexico, at 34,937 mt; followed by Turkey, at 17,641 mt; Japan, at 13,696 mt; Dominican Republic, 9,468 mt; followed distantly by Luxembourg, at 876 mt.

In general, US market conditions for rebar are not improving. Scrap prices continue to trend downward, and although most customers do not have very large stocks, end-use demand continues to soften along with the housing market. The glut of unsold homes in the US continues to grow, rising 3.9 percent in July to 4.67 million units, or an 11.2-month supply, while home prices continue to weaken. With the recovery of the housing market not yet in sight, US demand for rebar will continue to be negatively impacted for quite some time.

Looking to the coming weeks, the pricing trend for domestic rebar remains down due to the slow demand, falling scrap prices, and progressively competitive import offers. It is likely that mills will have to lower prices again in September to keep customers happy and to avoid losing market share to imports. For now, domestic prices continue to range from $50.75 cwt. to $51.25 cwt. ($1,119 /mt to $1,130 /mt or $1,015 /nt to $1,025 /nt) ex-mill, including the extra for 20-foot rebars.


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