As expected, US rebar producers, led by Nucor, have raised their prices for August shipments, matching July's shredded scrap price increase of $65 /nt ($72 /mt or $3.25 cwt.). And with domestic prices still below those for import rebar, the upward pricing trend for domestic rebar is far from over.
Taking into account the latest price increase, domestic prices for August shipments will range from approximately $52.25 cwt. to $52.75 cwt. ($1,152 /mt to $1,163 /mt or $1,045 /nt to $1,055 /nt) ex-mill.
With scrap prices projected to continue trending upwards due to the strong international demand, and import rebar arrivals expected to remain at low levels in the foreseeable future, domestic rebar producers will stay busy. Despite the absence of strong end-use demand for rebar in the US, the general market consensus seems to be that domestic mills will be able to continue raising their prices for at least the duration of the year.
Longs trader and Executive VP of Macsteel International USA, Mr. Tom Keller shared his view in his presentation at SteelOrbis' Steel Trade Conference last week that longs inventories in the US will remain tight through at least the fourth quarter and that US mills will be able to continue passing along the rising gas, energy, and raw material costs to customers.
Export opportunities arising from the weak dollar and strong international markets are also another factor that will help to keep US inventories tight. Mr. Andrew Marlen of West Coast rebar producer TAMCO Steel told the attendees in his presentation at the SteelOrbis conference that his company's international opportunities are recent, beneficial, significant, diverse and continuous (though their first priority is to satisfy domestic customers). Exports also provide an insurance of sorts against a major market downturn; though US mills are currently keeping busy meeting the demand from the import-deprived domestic market, they will be able to keep inventories tight by exporting more tonnage if/when domestic demand drops off.
Recently released steel export data from the US Import administration show a significant increase in rebar exports from the US in May compared to both the previous month and the same month of the previous year. Rebar exports in May totaled 61,628 mt, up from 43,727 mt exported in April 2008, and from 24,854 mt in May 2007. (The top foreign recipients of US rebar in May '08 were: Canada, at 46,102 mt; Jamaica, at 7,518 mt; and Panama, at 4,940 mt.)
On the import side, traders are continuing to offer their tons at a range of approximately $52.00 cwt. to $54.00 cwt. ($1,146 /mt to $1,191 /mt or $1,040 /nt to $1,080 /nt) FOB loaded truck, in US Gulf ports, with larger sizes (#4s and larger) trending towards the lower end of this range, and #3s at the higher end. These prices expected to slowly pick up, though it will take a couple of weeks for the domestic price increase to be fully absorbed and for traders to be able to raise their prices in turn.
As for new import offers, Japan and Mexico remain the only sources offering competitively to the US market, and in rather small amounts. Traders note that Japanese material recently purchased on a speculative basis will have an easier time finding homes because of the domestic increase, and that Mexican mills, currently offering at a range of $54.00 cwt. to $55.00 cwt. ($1,191 /mt to $1,213 /mt or $1,080 /nt to $1,100 /nt) delivered to the Gulf, are anxious to raise their numbers in line with the domestic price increase as well. Both Mexico and Japan are expected to continue selling into the US on a regular basis, though not in high enough amounts to affect inventories much. The lack of demand from the construction markets is helping with the tight supply situation, but with Turkish offers still out of sight, very few tons are coming in, and import inventories on the ground will continue to get slimmer in the coming months.