Rebar prices in the US have remained stable since last week, as domestic and offshore mills' efforts to raise prices in line with raw materials continue to be thwarted by weak demand.
US rebar producers still want to get their $40/nt ($44/mt or $2.00 cwt.) raw materials-based price hike that was announced earlier this month, but only about $20/nt ($22/mt or $1.00 cwt.) has been reflected in spot prices so far. With US cut-grade scrap prices likely to remain stable or trend slightly up in August, producers won't gain any relief on the raw materials side going forward either. Producers are adamant that they need to recover their increased raw material costs, but business just isn't strong enough to support an appreciable price increase for rebar.
For now, most spot prices for domestic rebar continue to range from $25.50 cwt. to $26.00 cwt. ($562 /mt to $573 /mt or $510 /nt to $520 /nt) ex-mill. Buyers comment that while mills will probably push at least another $10/nt ($11/mt or $0.50 cwt.) through within the next couple weeks, they may not get the full $40/nt.
While US rebar distributors have lowered their inventories significantly from their peak levels, sales remain slow and the fabrication business is even worse. Independent (non mill-affiliated) fabricators comment that it is difficult to compete with the mill affiliated fabricators, which are able to get better prices from the mills. Nevertheless, mill-affiliated or not, all sellers of rebar in the US are still suffering from the weak demand.
Although there are signs that the economy is bottoming, with expectations of some moderate growth in the second half, US commercial construction activity remains significantly down, with the General Contractors of America (AGCA) reporting last week that US commercial construction fell 71 percent in June compared to May and was down 22 percent from a year ago. The order book for commercial construction for the rest of the year looks bleak as well, and there are some reports indicating that US commercial real estate could be the next big blow to hit the economy, as vacancies and loan defaults in the industry are mounting.
With the ongoing soft demand for rebar from the commercial sector and little help from the government stimulus funds so far, import buying remains understandably quiet. Since raising prices following the US increase earlier this month, Mexican rebar offers to the US have remained at a range of $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt $490 /nt to $510 /nt) delivered to California and Texas. There are still very few orders though as prices remain too close to the domestic price to attract much interest.
On the Turkish side, import offers to the US are also unchanged since last week, remaining at a range of $25.00 cwt. $26.00 cwt. ($551 /mt to $573 /mt or $500 /nt to $520 /nt) duty-paid, FOB loaded truck in US Gulf ports duty-paid, FOB loaded truck in US Gulf ports. Turkish mills also want to raise prices because of increasing scrap costs; however, they are still not getting any bookings from the US at the current price level. Whereas the US wire rod market is slightly tighter on the supply side, leading to a few recent import wire rod fixtures from Turkey, US rebar demand is even weaker than that for wire rod, and if buyers do want to consider imports, Mexican offers are typically more viable.
The latest preliminary census data from the Steel Import Monitoring and Analysis (SIMA) system show that the amount of rebar tonnage the US imported fell sharply in June over May, from 40,840 mt in May, to 18,968 mt in June. Mexico was the largest source in June, with 13,558 mt, and Dominican Republic, with 5,297 mt, accounted for most of the rest of the tons. July license data, however, shows a modest pick-up in rebar imports. Data collected through July 28 show 25,986 mt, made up of 16,582 mt from Mexico; 7,021 mt from Turkey and 2,112 mt from Dominican Republic. Overall, though, import rebar tonnage remains significantly down from the 2008 monthly average of 73,300 mt, only surpassing it in March of this year, when rebar imports totaled 91,900 mt (see accompanying chart from SIMA). For the duration of the year, no major pick-up in import rebar arrivals is expected as very few bookings are currently taking place.
