Even though domestic mill prices are set to rise, the US rebar market continues to be soft in terms of demand, while import offers are still mostly out of the picture due to uncompetitive pricing.
This week, leading US rebar producer Nucor announced a modest transaction price increase of $1.00 cwt ($22/mt or $20/nt) for all rebar shipments effective June 1, 2009. This increase was driven by a rise in the RMS of $2.15 cwt ($47/mt or $43/nt) from a month ago, not by an improved demand. Furthermore, Nucor had to lower rebar base prices by $1.15 cwt. ($25/mt or $23/nt) to diminish the effect of the RMS increase. Still, the net price increase, small as it is, is a sign that producers are somewhat confident and want to convey to customers that the market has bottomed out. It is still too early, however, to say whether customers will accept this price increase; for now, domestic rebar offers continue to range from $24.00 cwt. to $24.50 cwt. ($529 /mt to $540 /mt or $480 /nt to $490 /nt) ex-mill. The pricing trend for domestic rebar is slightly up, as mills will make an effort to push through at least most of the $1.00 cwt. increase.
Concerning import offers for the US, Mexican rebar mills have softened their recent price increase of $2.50 cwt., reducing it to $2.00 cwt. after finding out that no US mill increased prices as much as they did. However, that price is not expected to be accepted in the US market as it would put Mexican offers at a range of $24.00 cwt. to $25.00 cwt. ($529 /mt to $551 /mt or $480 /nt to $500 /nt) duty-paid, FOB loaded truck in Houston, which is slightly higher than offers currently seen in the domestic market. SteelOrbis heard that Mexican mills have been experiencing an up-tick in domestic business and had increased their export price with the intention of avoiding US bookings and being able to fulfill their domestic orders. Nevertheless, market players expect Mexican import offers to come back down in two to four weeks to become more competitive in the US market, as Mexico's domestic demand is decent, but not stellar.
Just as with Mexican imports, Turkish import rebar offers for the US are still not competitive and continue ranging 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. However, interestingly enough, while US and Mexican import prices have increased, Turkish import prices now face downward price pressure after mills are no longer seeing enough demand from other regions to sustain their prices. It is expected that Turkish offers will trend down within the next week, as Turkish mills are cutting prices due to lack of demand, and traders' offers should soon reflect this. Furthermore, this slight downward trend in international rebar prices probably doesn't bode too well for further US and Mexican rebar price increases in the near future.
Meanwhile, despite the slowly shrinking rebar inventories in the US, the consumption picture remains rather bleak. On Tuesday, the Commerce Department released its latest report showing that in April construction of homes and apartments fell 12.8 percent from March to a seasonally adjusted annual rate of 458,000 units. That's the lowest pace on records in 50 years. Moreover, applications for new building permits dropped by 3.3 percent to an annual rate of 494,000, a record low, and multifamily home construction plunged 46.1 percent to an annual rate of 90,000 units after a 23 percent fall in March. Also, permits for multifamily construction dropped 19.9 percent from March, to 121,000 units.
On the other hand, the report showed construction of single-family homes rose 2.8 percent in April from March to an annual rate of 368,000 (although this figure is down 45.6 percent from last year), and building permits for single-family homes rose 3.6 percent from March to a rate of 373,000 in April. These small increases have been regarded as a hopeful sign that this sector of home construction may be stabilizing. Many economists say home construction will likely cease declining in the current quarter, yet a slow rebound is not expected until the spring or summer of 2010. The reasons for this late rebound are the huge overhang of unsold homes, a coming second wave of mortgage foreclosures, and the growing unemployment rate.