Scrap predictions for February have shifted, shedding a new light on last week's base price decrease for US rebar.
While the expectation for February scrap pricing had, up until now, involved another increase (although milder than January's), SteelOrbis has learned that shredded scrap will most likely trend sideways next month. Last week, many in the US rebar market wondered why mills didn't just add the raw materials increase on top of the base price increase that was announced earlier in January, instead of decreasing base prices by $1.00 ($22/mt or $20/nt). Apparently, domestic mills caught a whiff of February's likely neutral scrap trend, and wisely dropped the base in anticipation.
Another hint: spot prices for domestic rebar have not moved in the last week, hovering in the range of $37.00-$38.00 cwt. ($816-$838/mt or $740-$760/nt) ex-mill. Expectations that rebar would move past the $40.00 cwt. ($882/mt or $800/nt) level in February do not seem that likely anymore-scrap was already predicted to come down in March, and now that the trend reversal is happening sooner rather than later, customers will balk at higher prices.
Import offers have also stalled. Turkish mills have not produced any new offers of rebar to the US, although local Turkish prices have dropped slightly in the last week. Current prices of $34.50-$35.50 cwt. ($761-$783/mt or $690-$710/nt) duty paid FOB loaded truck in US Gulf ports have not been met with much acceptance in the last week, and there's a good chance offers might decline as early as next week.
Across the border, Mexican mills are adopting a "wait and see" approach, leaving current official asking prices in the range of $38.00-$39.00 cwt. ($838-$860/mt or $760-$780/nt) duty paid FOB delivered to US border states, while spot prices remain closer to $36.00 cwt. ($794/mt or $720/nt). In general, Mexican rebar mills have remained quite adept at riding the ebb and flow of the US markets--keeping their prices at a comfortable margin while nearly mirroring US movements. Perhaps that is why Mexico's import share of rebar in the US climbed 58 percent in 2010, according to Carlos Amezcua, Internationals Trading Manager of Tata Steel, during a presentation at SteelOrbis' 2nd Annual Rebar & Wire Rod Conference this week in Las Vegas. That percentage is expected to rise further in 2011, as Mexico retains its dominance as the US' top source of imported rebar.