As expected, US longs leader Nucor has lowered its rebar prices for September/October significantly, though not by the full amount of the scrap price drop.
By raising rebar base prices by $101 /nt ($111 /mt or $5.05 cwt.), Nucor was able to soften the $171 /nt ($189 /mt or $8.55 cwt.) drop in its raw materials surcharge (RMS) for a net decrease of $70 /nt ($77 /mt or $3.50 cwt.). The company specified in its announcement to customers that the new price level would remain in effect through October 31, most likely to reassure customers that the market will not continue to soften.
Nucor, however, was not the first US longs producer to announce pricing this month. Prior to Nucor's announcement, Gerdau Ameristeel made an usual move, notifying customers that it would be keeping its pricing stable through the end of the year. Many market players say, however, that there is a good chance that Gerdau will not really be able to keep its rebar prices stable through the end of the year as import prices and scrap prices continue to trend down, and it will have to cut some deals to remain competitive.
Both Nucor and Gerdau Ameristeel indicated in their price letters that they expect the market to recover in the fourth quarter. They may very well turn out to be right, but again, they could also be trying to quell fears that prices will continue to drop. Soothing the fear in the market is not a bad idea, though. It is often said that the current market downturn has a significant psychological aspect, and that, once buyers are assured that prices have bottomed out, they will have to replenish their inventories, which do not appear to be excessive in the US.
Taking into account the $70 /nt drop, US domestic rebar offers now range from approximately $47.25 cwt. to $47.75 cwt. ($1,042 /mt to $1,053 /mt or $945 /nt to $955 /nt) ex-mill. Even with this significant drop, however, domestic prices are still above the import spot level.
As for import rebar, spot offers have weakened by an average of $1.00 cwt. ($22 /mt or $20 /nt) in the last week, with most offers now ranging from $46.00 cwt. to $47.00 cwt. ($1,014 /mt to $1,036 /mt or $920 /nt to $940 /nt) FOB loaded truck in Houston. New offers from Mexico are also priced in this range. However, there are very few transactions taking place, as buyers expect prices to keep weakening. The Mexican material in particular is a major factor pushing the spot price down, as it is currently the most competitive import source due to Mexico's soft home market. Rebar inventories at Mexican mills are very high. Normally they have about a month's supply on the ground, but, currently, they have two to three months' worth of inventory, ready to ship anywhere in the US with bargain numbers.
For now, due mostly to the weakening foreign markets whose prices for the US are getting lower every week as they become increasingly desperate to sell some tonnage, the pricing trend for both domestic and import rebar in the US remains down. In addition to the weakening global longs markets, scrap prices are trending down as well because of the weak foreign demand. There are some estimates that scrap will recover in the fourth quarter once Turkey starts buying again after Ramadan concludes; however, due to the very soft market conditions in Turkey, it is not a sure thing that they will re-enter the market in a major way.
Despite the depressed state of the rebar market, the current weakness may be short-lived. The amount of positions coming in is not significant, and, since inventories in the US are not that high, once the "panic mode" ends, buyers may book some good quantities for January arrivals. For the coming few weeks, though, a market recovery is not yet in sight.
License Data from the Steel Import Monitoring and Analysis system show that in August, import rebar licenses totaled 62,943 mt, compared to July License Data of 87,906 mt and July Preliminary Census Data of 78,817 mt. The countries which showed the highest number of licenses for import rebar in August were Mexico, 38,442 mt; Japan, 21,915 mt; Dominican Republic, 1,918 mt; Canada, 315 mt; and Germany, 238 mt.