US rebar producers may have to eat another scrap price hike as soft demand persists

US rebar producers are stuck in a kind of “Catch-22” as their raw material costs continue to increase, while weak demand for their product makes it difficult them from passing along these increases.

While US cut-grade scrap prices have risen about $90/long ton since July (after rising an average of $60/lt in July, $15/lt in August and another estimated $15/lt in September), US rebar mills have raised prices by less than half of that amount, boosting transaction prices by $40/nt in August and keeping prices unchanged in September. Market leader Nucor has yet to announce its October pricing decision yet, which will take into account its September scrap costs, but with scrap only up slightly in September, Nucor and other producers may choose to absorb their increased raw material costs once again. Mills would certainly like to raise prices, but demand does not seem to allow for it.

Nevertheless, one long products mill, Evraz Rocky Mountain Steel, has already announced a $50/nt ($2.50 cwt. or $55/mt)  price increase for October. But regardless of Evraz' price move, Nucor will still likely be the entity to set the tone for October rebar prices.

While most US mill offers continue to range from approximately $25.50 cwt. to $26.00 cwt. ($562 /mt to $573 /mt or $510 /nt to $520 /nt) ex-mill, distributor inventories are still on the high side, with distributors in Texas reportedly trying to sell their inventories on the ground for as low as $25.00 cwt. ($551 /mt or $500 /nt) and still not getting many orders. Prices aren't expected to dip further, as lack of import arrivals and buyers' cautious stance on purchasing are preventing further inventory buildup; however, given the lack of demand and cheaper distributor offers, the domestic rebar price trend has shifted to neutral.

Although rebar mills in Mexico are still trying to raise prices, offers to the US still generally remain at the range of $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt $490 /nt to $510 /nt) delivered to California and Texas, where they have been lingering for over a month. With this price range being close to the domestic mill offers and with the discounted distributor tons available in Texas, Mexican mills will not be able to push up their offers anytime soon, or even get many bites at the current range. 

Meanwhile, import offers from Turkey are still priced out of the market, with most offers ranging from approximately $26.00 cwt. to $27.00 cwt. ($573 /mt to $595 /mt or $520 /nt to $540 /nt) duty-paid, FOB loaded truck in US Gulf ports. Despite lack of orders, Turkish longs mills have been reluctant to lower their export prices in recent weeks. However, this could possibly change, with prices starting to retreat somewhat again if demand does not firm up by the end of Ramadan (fourth week of September), or sooner. The overall price trend for import rebar offers to the US remains neutral for the time being.