Tight supplies meet weak demand in US rebar market

US rebar demand continues to be weak as consumption remains slow and the US stimulus package funds have yet to make their way to many rebar-related applications.

Domestic rebar offers have remained stable since last week at a range of $24.50 cwt. to $25.00 cwt. ($540 /mt to $551 /mt or $490 /nt to $500 /nt) ex-mill but prices are not expected to start trending upward again in the near future. The lack of imports has helped on the supply side, but weak demand remains a major stumbling block.

Although the US economy seems to be close to bottoming, the outlook for commercial and residential construction is grim. Commercial construction projects planned for the next six months look even weaker than they are at present, making it hard to envision an improved US demand for rebar anytime soon. For now, there are not many prospects for rebar demand to make a speedy recovery, and the sole bright spot for the market remains the tight supplies.

The $80-some billion in infrastructure funding from the $787 billion Recovery Act passed earlier this year are not affecting rebar demand and it may be a while before the funds are felt. An ambitious $500 billion transportation and infrastructure renewal bill has been proposed to replace the existing federal transportation law; however, this legislation is likely to get gridlocked in Congress due to its high price tag and the lack of funding to support it. 

It is likely that the infrastructure money from the first stimulus package will start to trickle into the system by early next year, however, which will provide at least a small boost for rebar. Murray McClean, CEO of rebar producer and fabricator Commercial Metals Company said this week in its quarterly conference call regarding the US rebar market, “We are seeing some small signs of a pick up in demand. However, this is more a function of seasonality and restocking of certain steel products than a general recovery in demand.” Mclean also noted, though, that the rebar and merchant bar prices should at least stabilize over the coming months, and then start to pick up in early 2010 as infrastructure funds start to take effect.

On the bright side, it looks like US rebar inventories will stay lean for the near future, since, there are very few imports being booked or in the pipeline. As one trader put it, “If there's anything coming, it couldn't be much.”

Mexico remains the most competitive import source for rebar, and offers have weakened by about another $0.50 cwt. ($11 /mt or $10 /nt) since last week, with most offers now falling into a range of $22.00 cwt. to $23.00 cwt. ($485 /mt to $507 /mt or $440 /nt to $460 /nt) delivered to Houston. While Mexican mills were more bullish about the longs markets several weeks ago, the recent drops in Mexican import prices could pose a threat to the US rebar mills' newly-found price stability. Still, very few Mexican tons are being booked at present.

Turkish offers remain uncompetitive at an offering range of $24.00 cwt. to $25.00 cwt. ($529 / mt to $551 /mt or $480 /nt to $500 /nt) duty-paid, FOB loaded truck in US Gulf ports; however there are no bookings taking place at this price level, so there is a good chance this range will come down soon. For now, however, Turkish mills are holding firm.

Preliminary Census Data from the US Department of Commerce show that in May, the US imported a total of 40,748 mt of rebar, which is up from the 28,361 mt imported in April, but down from the 51,307 imported in May of 2008. The top import rebar sources in May 2009 were: Mexico, with 21,503 mt; Turkey, with 15,149 mt; and Dominican Republic, with 3,913 mt. For June, however, things are looking more sparse, with license data only reflecting 12,288 mt through June 24.