US domestic rebar and wire rod markets were steady to higher this week as a growing number of market insiders told SteelOrbis that August scrap prices were likely to rise, causing a bump in some finished steel prices, they said.
Starting during the week of July 22, market contacts said a price bottom for rebar was likely at hand because of the growing call for a sideways to $20/gt ($22/mt) delivered to mill rise in Midwest scrap values, especially for prime grades, they said. While most agree, August scrap is likely to show higher than July, the outlook for long steel products such as rebar and wire rod remains somewhat uncertain as inventories are said to be plentiful with mills still prepared to offer buyer discounts to those with contracts in hand.
“We need more demand in the market to make this the bottom (for rebar),” one Midwest rebar market insider told SteelOrbis. “As we move through the third quarter, we should see demand begin to pick up, but it will largely depend on what the Federal Reserve decides to do with interest rates.”
Following a slight rise during the week of July 22, US domestic rebar is discussed $1.00/cwt. ($20/mt) higher at $38/cwt. FOB mill, versus previous assessments at $36.00-$38.00/cwt. ($720-760/nt or $794-838/mt).
In the domestic wire rod market, prices remained flat to last week at $38.50/cwt. ($849/mt or $770/nt) FOB mill, market insiders said. Wire rod mesh Ex-mill US rose $50/ton to $57.50/cwt ($1,268/mt), rebar dealers said.
US Gulf Coast loaded truck rebar is discussed steady at $36.50/cwt. ($805/mt or $730/nt), rebar traders said. US East Coast rebar was unchanged at $37/cwt. ($816/mt or $740/nt).
Speculation remains high that the Fed will reduce interest rates in the fall ahead of the national presidential election, which could spur spending in the construction industry. High interest rates, market insiders claim, have limited demand growth within the US construction industry as current interest rates continue at 23-year highs.
According to ABC news, the outlook for a rate cut from Wall Street has shifted from “if to when,” based on a months-long stretch of data that has established the key conditions for a rate cut: cooling inflation and slowing job gains.
As predicted by economists, the Fed decided to leave interest rates unchanged on July 31, deferring the decision until its next meeting in September, offering the central bank “more time to ensure current trends hold,” ABC News said.
“It’s hard to tell if this is the (price) bottom for rebar,” another East Coast rebar insider told SteelOrbis. “If you go to the mill with an order in hand, it’s still a buyer’s market, so you can pretty much get what you need.”
On the topic of increased construction spending during the third quarter affecting the finished steel market, the rebar contact remains pessimistic.
“Why would spending get any better,” he said. “We are already in the perfect storm, with record high interest rates, high inflation including higher labor costs, as well as high debt levels and low confidence combining to slow our economy to a grinding halt.”
Some rebar insiders still caution that a solid price bottom for the long steel markets could depend on whether mills decide to purchase more scrap during the August buy cycle. Mill inventories, they say, will determine whether the August outlook for higher scrap continues in the coming weeks.
“It seems like the market feels somewhat more optimistic about pricing this week, with many buyers willing to adjust their budgets to accommodate a higher price of scrap,” one scrap insider told SteelOrbis.