The US rebar market is awaiting market leader Nucor’s official price announcement to learn if rebar will follow the up-tick that US shredded scrap underwent in May.
At press time, US domestic rebar offers continue to be at the same range as we reported last week, of approximately $24.00 cwt. to $24.50 cwt. ($529 /mt to $540 /mt or $480 /nt to $490 /nt) ex-mill. The market conditions remain soft and sales are still pretty stagnant. Some mills have told SteelOrbis that their sales activity levels have increased somewhat in recent weeks, yet these increases are only minor. Inventories, in general, continue to slowly decrease, although while some distributors and fabricators have finally reached very low inventory levels, some others still report medium to high levels.
Although rebar demand has not improved much, shredded scrap prices have increased by some $43/nt above Nucor's Raw Material Surcharge (RMS) baseline of $162/nt, and the RMS will rise accordingly. What remains to be seen is whether the company will counter some or all of the increase in RMS by adjusting rebar base prices, which the market will find out in the company's announcement regarding June prices that is expected to be out any day now. As the rise in scrap prices is only moderate and demand remains soft, most market players think the firm will keep prices stable; nevertheless, there is a chance that Nucor will make the gesture of a slight price increase in order to keep prices from sagging further. Nevertheless, even if Nucor announces a price increase, it will only be symbolic unless demand improves. Until demand makes a lasting comeback, spot prices will continue to trend sideways to slightly down, regardless of Nucor's announcement.
Meanwhile, looking to the US' neighbor to the South, one of the major Mexican rebar mills officially raised this week their offers to the US by $2.50 cwt. ($55/ mt or $50/ nt); however, this move is unjustified by the US market conditions, and the price hike has yet to be accepted in full. Some dealers believe that the intention of such a move was to influence US domestic companies to raise their rebar prices in turn.
Nevertheless, with US domestic rebar prices likely to remain stable for the foreseeable future, most of Mexico's price increase will most likely be rejected. For now, accepted import rebar offers from Mexican have only risen by $0.50 cwt ($11/ mt or $10/ nt) since last week, with most offers now ranging from $22.00 cwt. to $23.00 cwt. ($485/ mt to $507/mt or $440/ nt to $460/nt) loaded truck in Houston. Regardless of the price increase, similar to the US, Mexican rebar import prices are expected to follow a sideways trend in the near future due to the sluggish US demand conditions.
Regarding the US' other main import rebar source, as Turkish sales to Egypt have slowed down, Turkey may once again become interested in conducting business with the US and accordingly, may start offering to the US at levels that are more comparable with those of Mexico. In the meantime, Turkish mills are still trying to hold onto their higher prices, with most offers continuing to range from about $23.50 cwt to $24.50 cwt ($518 /mt to $540 /mt or $470 /nt to $490 /nt) duty-paid, FOB loaded truck in US Gulf ports. Nevertheless, the Turkish import trend has now become slightly downward as the Turkish mills' order books probably cannot sustain their higher prices for much longer.
As we are about to enter the second half of the year, the enduring poor economic conditions in the marketplace continue, and recovery will be slow, at best. Still, some economic signs continue to indicate that we are near or at the bottom. Last week, the Commerce Department said that total US construction spending rose by 0.3 percent in March, which is the first gain in six months. The government’s report further detailed that in March, spending on residential projects fell 4.2 percent, spending on nonresidential construction projects rose 2.7 percent, and spending on public projects rose 1.1 percent. Moreover, low interest rates on mortgages, lower home prices and the stimulus-funded $8,000 tax credit for first-time buyers are all good incentives that are increasingly affecting the housing market in a positive way. Chief economist for the National Association of Realtors, Lawrence Yun says that as housing inventories are declining, we may soon see home prices begin to stabilize or even turn upward in some markets. Then again, starting in April, as the three-month foreclosure moratorium expired in March, the data are expected to show that foreclosures skyrocketed, and the trend of increased foreclosures is expected to continue in the coming months.