Many in the US rebar market were unpleasantly surprised to learn this week that market leader Nucor would pass along the full $30/nt ($33/mt or $1.50 cwt.) decrease in raw material costs onto rebar transaction prices.
As reported by SteelOrbis, Nucor announced Wednesday that it would lower net prices for rebar by $30/nt effective for shipments on or after October 15, 2009. The net $30/nt drop reflects the $30/nt decrease in the company's new Raw Materials Surcharge (RMS) applicable to long products when compared to the RMS at the beginning of the month, while rebar base prices will remain unchanged from October 1 levels.
Prior to the announcement, it was speculated that Nucor and other domestic rebar producers would probably pass on a portion of, but not the full $30/nt drop in the RMS to rebar transaction prices. However, US rebar demand remains very weak and with both scrap prices falling and import rebar numbers starting to get more attractive, Nucor evidently decided that in order to stay competitive, it was in their best interest to pass on the full decrease in the RMS.
Nucor's $30/nt decrease brings most domestic rebar offers to a level of approximately $23.00 cwt. to $23.50 cwt. ($507/mt to $518/mt or $460/nt to $470/nt) ex-mill. However, some larger buyers say they can get material at below $23.00 cwt. With demand remaining weak, both scrap and import prices trending down, and US producers continuing to offer discounts, the price trend for domestic rebar is still pointing downward, even after this week's decrease.
Import-wise, it is thought that Mexican mills will probably follow Nucor's lead. For now, offers from Mexico are at about the same range as the new domestic price level, though this price will probably come down by at least $1.00 cwt. ($22/mt or $20/nt) or so within the next couple weeks.
Meanwhile, Turkish rebar offers for the US have decreased by approximately $1.00 cwt. within the last week, and will likely continue to drop now that the US decrease has been made. Furthermore, scrap and billet costs in Turkey are still trending down, and export business for longs, especially rebar, is very weak. For now, Turkish offers for the US range from approximately $25.00 cwt. to $26.00 cwt. ($551/mt to $573/mt or $500/nt to $520/nt) duty-paid, FOB loaded truck in US Gulf ports, though the pricing trend is down.
On the bright side, US rebar imports have remained very sparse for most of the year, and even though demand is weak, there has not been any inventory build occurring as doing so would be too risky given the uncertain market outlook. The low inventories should help the market to tighten up again quickly once consumption finally starts to get back to healthy levels. Final census data released by the US ITC this week show that US rebar imports in August slid 71.68 percent this year compared to a year ago, totaling 21,370 mt. This figure was also down by 27.37 percent from July. Based on the most recent license data, it looks like US rebar imports likely dropped even further in September - there are only 17,562 license tons recorded for the month. In the January-August period of this year, US rebar imports totaled 303,670 metric tons, decreasing by 59.66 percent from the same period of 2008.