As Turkish mills’ recent longs price increase's accuracy in reflecting the present conditions of the marketplace is still in question, the US rebar market has continued to weaken since last week, making it seem unlikely that the new import rebar offering levels will be accepted.
Domestically, US rebar demand continues to be weak due to the global recession. Firms still have high inventories and continue to lower their offering prices to accelerate their de-stocking activities. Although no official announcement has been issued, US domestic spot prices have dropped further since last week and now range from $24.00 cwt. to $24.50 cwt. ($529 /mt to $540 /mt or $480 /nt to $490 /nt) FOB mill. Domestically, shredded scrap prices are expected to drop slightly further this month, putting downward pressure on US longs. Conversely, global scrap prices are showing some signs of recovery, and thus the US rebar market may slowly transition from a downward trend to a sideways one upon recovery of the domestic scrap market. However, it is not yet clear exactly when the US scrap market will bottom out.
Even though domestic rebar spot prices have dropped and scrap may weaken slightly this month, it is doubtful that an official decrease of domestic rebar prices will be announced in April as market conditions appear to be close to bottoming out (though a small decrease is a possibility if Nucor and others want to get their prices closer to actual spot levels). In the meantime, US companies continue to be in a survival mode, with production levels at 50 percent or less, as they wait for clear signs showing an improvement in the US rebar market that will lead to more stable or improved conditions.
On the import side, sales prices for Turkish rebar have remained the same since last week at approximately $21.50 cwt to $22.50 cwt ($474 /mt to $496 /mt or $430 /nt to $450 /nt) duty-paid, FOB loaded truck in US Gulf ports, although there is very little booking activity of new orders takign place. Despite Turkey’s move to raise prices in late March, neither international nor US demand seem to be solid enough for a sustained upturn, and therefore, it is still doubtful that this increase will stick. There is reportedly little, if any, US interest in the new Turkish offers, and therefore, sales prices of import material in the US have not risen to meet the latest Turkish asking prices.
Meanwhile, Mexican rebar offers to the US have come down from last week and now range from $23.00 cwt. to $24.00 cwt. ($507 /mt to $529 /mt or $460 /nt to $480 /nt) loaded truck in Houston. Similar to US mills, Mexican producers continue carrying high levels of inventory and are lacking demand. Nevertheless, the Mexican domestic rebar market is somewhat stable and offers are expected to trend sideways to slightly down, more or less in step with US rebar prices.
The US economy continues suffering the impact of the global recession. However, a study by The Institute for Supply Management released on Wednesday shows US factory activity contracted at a slower rate in March compared to previous months and that industrial production is rather close to reaching stability. More data released by the US DOC Wednesday shows that US construction spending fell only 0.9 percent in February, which is lower than expected as the same rate dropped 3.5 percent in January. Despite the overall gloomy economy, there are more and more encouraging signs that US steel demand may be close to bottoming out and that the weak economy is slowly starting to recuperate.