All is quiet on the US rebar market front, as mills continue to wait out the slow demand, anxiously watching the scrap market trend and eagerly waiting for President-elect Obama to reveal the extent to which rebar-intensive infrastructure products will be emphasized in his national economic stimulus package.
US scrap numbers for January should be out any day now, and there is a good chance that prices will see at least a slight up-tick from December due to the seasonally slow scrap collection activity, lack of industrial scrap generated in manufacturing, and increased export interest from Turkey. However, given the continued slow finished product demand and production levels from steel mills remaining at very low levels, it is not likely that scrap prices will register an increase large enough for US rebar mills to pass along to customers, especially if they want to protect their market share from imports. A small price increase for US rebars is not out of the question if the scrap numbers warrant it, but it would be largely symbolic.
Since raw materials aren't likely to give US rebar a boost in this first month of the New Year, will demand? Don't count on it. Rebar consumption remains very weak across the nation due to the lack of construction activity, which is just as much a result of the current economic conditions as it is of the cold winter weather.
Looking forward, domestic steelmakers are hopeful that the incoming President will give the industry a boost in the form of an infrastructure stimulus package, preferably with a "buy American" clause, which industry leaders like Thomas Danjczek of the Steel Manufacturers Association, Nucor CEO Dan DiMicco and the American Iron and Steel Institute are lobbying for. However, it's not clear yet whether the bulk of Obama's stimulus package would be spent on infrastructure renewal or on other projects like green jobs, tax cuts, etc. Also, if a major infrastructure package were to be implemented, steel would not feel its effects immediately.
So for now, US rebar prices continue to trend sideways as mills' disciplined production and the relatively low amount of imports play their part in counterbalancing the slow demand. Generally, domestic prices continue to range from approximately $28.00 cwt. to $28.50 cwt. ($617 /mt to $628 /mt or $560 /nt to $570 /nt) FOB mill. Large buyers can demand and get better numbers, however. In any case, an official price decrease from the mills this month is highly improbable as producers know it is important to project confidence about the market as we embark on a New Year, which could be a great opportunity for a fresh start.
On the import side, most new offers from Turkey and Mexico continue to range from approximately $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt or $490 /nt to $510 /nt), duty-paid, FOB loaded truck in US Gulf ports for Turkish offers and delivered to Texas for Mexican offers. Distributors too are selling at this range for spot deliveries.
For the West Coast, small shipments of rebars from Taiwan are starting to emerge at a range of $25.00 cwt. to $26.00 cwt. ($551 /mt to $573 /mt or $500 /nt to $520 /nt) duty-paid, FOB loaded truck in West Coast ports. Japan, the traditional rebar supplier for the West Coast, is currently struggling to overcome its currency disadvantage in exporting to the US. The yen has been very strong against the US dollar in the last three months.
There is also quite a heavy inventory overhang on the West Coast with very slow consumption due to the dismal construction activity.
While the bottom of the market is near, there still may be some more room for import rebar to fall. SteelOrbis hears that due to lack of orders, some Mexican mills are getting ready to lower their prices for the US by another $1.00 cwt. or so, though they are waiting until at least next week so as not to start off 2009 on a bad note. On the other hand, Turkish mills are experiencing rising raw material costs, which may eventually lead them to raise their longs prices. The general sentiment among traders is that the import rebar market, at large, is very close to the bottom.
While imports remain more competitive than domestic offers, not many new import offers from overseas are being booked, and US Department of Commerce data show that import rebar arrivals to the US were on a steady decline from September through the end of the year. License Data collected through January 6 show that in December 2008, rebar imports totaled only 16,082 mt, down from 19,982 mt in November, 34,294 mt in October, and 52,870 mt in September. In December 2008, the US' only sources of import rebar were: Turkey, at 13,191 mt; Mexico, 4,867 mt; Dominican Republic, 1,218 mt; Vietnam, 519 mt; Germany, 147 mt; and China, 40 mt.