US domestic rebar and wire rod markets moved higher this week, as recent economic stimulus programs in the US and more recently China, has begun to change market sentiment toward an outlook for higher finished steel prices as we head into the fourth quarter, market insiders told SteelOrbis this week.
And even though current demand in the US remains little changed from September levels with supply reported mostly adequate, market insiders said lower borrowing costs both in the US and abroad, and reduced political risk after the upcoming US presidential election is settled in November, should see steel demand begin to pick up, they said.
“We’re starting to see prices rise a bit on the domestic side a little bit, but it remains to be seen whether the increases are sustainable,” said one rebar market insider.
In the weekly spot markets, domestic rebar on an FOB mill basis is assessed in a wider range about $0.25/cwt. higher ($5/nt) on average at $35.00-38.00/cwt. ($700-770/nt or $772-849/mt), up from $36.00-36.50/cwt. ($720-730/nt or $794-805/mt) seven days ago. Like last week, new spot activity remains limited, with a noted lack of aggressive mill discounting programs heard.
“Traders are scrambling to get the old pricing, and domestic mills are not as flexible on pricing as they have been and are wanting to wait to sell to see what happens with the Asian markets,” said another rebar market contact. “Customers are wanting to buy rebar this week for re-stocking purposes, so we’re seeing a lot more activity and the old prices are simply not there.”
Weekly prices for domestic wire rod were reported higher at an average $36.00-36.50/cwt. ($720-730/nt or $794-805/mt) up $0.50/cwt. ($10/nt or $11.05/mt) from an average $35.75/cwt. ($715/nt or $788/mt) one week ago.
Market insiders said domestic long steel availability is likely to be reduced a bit through the end of October since it was heard that Peoria, Illinois-based Liberty Steel would reduce output at its 700,000 mt annual output wire and rod plant. Although more details were not forthcoming from Liberty, output of some grades of domestic wire and rod will be reduced through the end of October at the facility because of “ongoing challenges the steel market is facing, including low-priced imports,” the reports said.
While domestic long steel supply could be trimmed during October by plant slowdowns, recent stimulus actions by the US and China are likely to help prices rise longer term as more investment dollars move into the metals markets.
“Asian mills are looking at the recent spikes in steel futures prices in China as an opportunity to raise prices, but it doesn’t really mean that prices will change in the spot markets” the US Gulf Coast-based rebar market insider added. “European markets are taking a wait and see attitude, wanting to see what happens with pricing after the Chinese holiday ends on October 7. If the Asian rally is sustainable, it could affect the US markets.”
The contact added that some scrap dealers in and around Chicago were pushing for an October price increase, “though we’re not sure it will happen,” he said.
At last report, market consensus indicates October scrap at a sideways to soft-sideways settle, largely based on continuing low finished steel demand in the US and minimal effects on October scrap deliveries to export markets from the US East Coast as a result of the ongoing port worker strike at US East Coast and Gulf Coast ports. As much of the October scrap was booked long before the strike occurred and is currently in transit, strike effects on October scrap are expected to be minimal. The longer the strike occurs, though, insiders caution scrap prices might rise for November and December deliveries as supply from the US is curtailed.
“The domestic rebar market has shown positive signs of stability to close September,” said another rebar market insider. “While the market price today remains depressed because of prolonged pressure in recent months, stronger than expected demand in September seems to have helped take the pressure off further (downward) price movements as we head into October.”