US rebar mills' $40/nt ($44/mt or $2.00 cwt.) price hike announced last month seems to be sticking, as producers have been united in their efforts to raise prices, and import competition remains scarce. US scrap prices set to rise again this month, but with rebar demand remaining iffy at best, will mills be able to push through another price increase?
Rebar business in the US remains slow, despite the rising raw material costs and low inventory levels. Working in the domestic producers' favor, however, is the lack of competitive import offers and a reported up-tick in demand for Department of Transportation-approved rebar. US rebar distributors have noted the trend of increased requests for DOT-approved rebar, which is likely to be used in stimulus package-funded projects. However, it is not clear yet whether this material is needed for approved projects or if it is is just being requested in the anticipation of coming stimulus projects. Either way, mills and distributors are happy for the upturn in business, however slight.
In other good news for rebar, the Department of Commerce reported this week that US construction spending rose by an unexpected 0.3 percent in June, after falling 0.8 percent in May. Public construction spending rose 1.0 percent, to a record high $322 billion, including a 1.0 percent increase in construction spending on state and local governments, and a 1.9 percent increase in federal construction. Private construction continued to shrink in June, but only by 0.1 percent. While these slightly fluctuating month-to-month figures may just be evidence of the construction market "bouncing around at the bottom," stimulus package-funded infrastructure projects are expected to ramp up in the second half of the year, providing at least a small boost to US rebar.
Nevertheless, overall US rebar demand is still undoubtedly slow, and while US scrap prices are expected to rise again in August, it is not clear whether rebar producers will be able to pass along their raw material costs to consumers. Mills will likely try for another hike for September shipments, but they could find it challenging to push it through. For now, following the August hike, most domestic rebar offers range from $25.50 cwt. to $26.00 cwt. ($562 /mt to $573 /mt or $510 /nt to $520 /nt) ex-mill.
One thing the domestic producers don't have to worry too much about these days is import competition. Offers from Mexico are somewhat viable, mostly offered at a minimum of $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt $490 /nt to $510 /nt) delivered to California and Texas, though the price difference between Mexican and domestic offers isn't wide enough to make imports worth it most of the time. Most companies are happy to buy small amounts domestically and keep inventories slim. Mexican imports are convenient enough to get some traction on the spot market, but domestic mills aren't losing any major market share to Mexican rebar imports based on prices, as Mexican mills have been quick to match or even exceed every scrap-based price hike ventured by US mills this year.
Rebar imports from Turkey are even less competitive and prices are expected to rise further this month due to increasing raw material and domestic rebar prices in Turkey. Raw material prices and longs demand in the region and in Europe are expected to increase after the summer holiday period, but for now, Turkey's rebar export activity remains subdued despite the rising scrap and billet markets. The current offering range for Turkish rebar imports is 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; however, this range has yet to gain any US acceptance.