The US rebar market continues to suffer as slow demand and bleak economic conditions lead to very weak sales.
Officially, domestic rebar prices remain stable at a range of $46.25 cwt. to $46.75 cwt. ($1,020 /mt to $1,031 /mt or $925 /nt to $935 /nt) ex-mill, but with the market being so weak and imports being offered at significantly below this range, the mills will have to offer further discounts in the coming weeks in order to get some orders.
"At the very least, the producers are going to have to offer deals for large orders," one longs trader told SteelOrbis this week, after remarking on the stiff import competition.
In addition to the already weak demand and bounty of cheaper import offers, the tightening credit crunch threatens to further constrain steel consumption as both commercial construction and government-funded infrastructure projects face increasing difficulty in gaining financing. Many projects have already been put on hold and many more are threatened going forward if the credit market remains in its current frozen state. The long-awaited rebound of the housing market will also be delayed as long as the credit crisis continues.
Very little activity is taking place on the import side either, despite the much cheaper offers. Prices are expected to fall further as weak demand overseas and in Mexico is causing foreign mills to lower their prices. The current spot price level for import rebar still stands at approximately $42.00 cwt. to $43.00 cwt. ($926 /mt to $948 /mt or $840 /nt to $860 /nt) duty-paid, FOB loaded truck in US Gulf ports, and new offers from Mexico range from $42.00 cwt. to $43.00 cwt. delivered to Houston. There are very few transactions taking place, though.
On the up-side, there is hope that the current downtrend will reverse course fairly quickly. An economic bailout plan is still in the works, and if the new plan goes through, it might provide just the shot in the arm that the credit market needs. In addition, domestic mills are very aware of the current situation and will cut production as needed to adjust to the lower demand. Meanwhile, while import offers are very competitive, very little tonnage is actually arriving on US shores. Licensing Data from the Steel Import Monitoring and Analysis System (SIMA) as of September 30 show only 52,932 mt of import rebar licenses for September, compared to import rebar total of 75,177 mt in August, and 114,102 mt in September 2007 (census data).
The top import rebar sources represented in the license data for September are Turkey, at 18,970 mt; Japan, at 15,237 mt; Mexico, at 14,224 mt; Dominican Republic at 4,178 mt; and Germany, at 241 mt. Although Turkey remains the US' largest import rebar source, the September data show much lower numbers than the 53,800 mt of rebar the US imported from Turkey in September 2007 or the 2007 monthly average Turkish rebar imports of 34,400 mt.