Softening scrap prices threw cold water on the sizzling rebar market, changing the outlook within days. While the demand side of the US domestic rebar market remains decent, it is a given that the recent dips in scrap pricing will prevent prices from rising in the near future.
After registering significant gains in March, shredded scrap prices have fallen approximately $40 to $45 /long ton in the past few weeks. However, this does not necessarily mean that domestic rebar producers will lower prices. As rebar demand and other macro-economic indicators remain good, it is likely that domestic leader Nucor will choose to keep prices stable for at least another month. As Nucor usually opts to keep prices steady rather than changing them drastically every month to reflect ups and downs in the scrap market, the company will likely use the recent changes in the scrap market as an opportunity to raise rebar base prices and lower the raw material surcharge, keeping net transaction prices the same.
Demand for domestic rebar should remain robust into the summer, as non-residential construction continues to heat up. Also, it is unlikely that the domestic market will lose any market share to the import market, as imports are priced too high to provide much competition.
For now, domestic rebar prices range from $32.65 cwt. to $33.15 cwt. ($720 /mt to $731 /mt or $653 /nt to $663 /nt) FOB mill. The pricing trend is now neutral, due to the decrease in scrap prices.
The pricing trend for imports has also flattened out, as there is currently hesitation to buy since imports are priced too closely to domestic prices, and the end price often ends up higher than the domestic price due to the inland transportation costs. Also, with domestic scrap prices falling recently, domestic rebar prices are no longer expected to strengthen, making high-priced import offers even less desirable to US buyers. The general sentiment in the market is that if import prices haven't peaked yet, they are very close to peaking.
Turkish rebar mills are relatively full at the moment. At the same time, however, there has been a relaxation of restrictions, with offers with a reasonable amount of 20-footers (which are usually restricted during a robust market period) available to the US. The main reason for Turkish producers' increased willingness to sell to the US is that the Middle Eastern market is not buying as much, as most inventories are sufficiently high for distributors to choose not to buy rather than risk overstocking. Therefore, US orders are needed to keep the Turkish domestic and import prices afloat. On the other hand, Turkish rebars are finding new life in the booming European market, so no one is panicking at this point.
Another sign of more loosening up of the import market is that there is currently more availability from Asia, and more willingness to sell from countries like Taiwan and Japan.
In general, import offers have not moved in the last week, with most offers still ranging from $32.00 cwt. to $33.00 cwt. ($705 /mt to $728 /mt or $640 /nt to $660 /nt) FOB loaded truck, in US Gulf ports.
Data from the US import administration show that year-to-date (January through March 2007), the top five sources of import rebar to the US were (rounded to the nearest hundred tons): Turkey at 153,200 mt, Mexico at 72,700 mt, Taiwan at 59,900 mt, Malaysia at 54,300 mt, and Japan at 50,100 mt.
Total YTD import rebar tonnage to the US at the end of March was approximately 503,100 mt. This was over 100,000 mt lower than the total YTD import rebar tonnage to the US for the same period of 2006, which stood at 605,700 mt.