All posts tagged rebar

With the worldwide financial crisis showing no signs of abating and the US headed into what many analysts predict will be a long recession, there is not a great deal of hope that the global steel markets will see a speedy recovery. However, the outcome of the historic US presidential election underway Tuesday will certainly have at least some effect on the direction of the US economy and, directly or indirectly, on the steel markets. As a major rebar distributor in the US told SteelOrbis this week, “The presidential election will definitely have an impact on the market, but how much of an impact is unclear.”

With US shredded scrap prices falling below Nucor’s $162/nt scrap surcharge baseline, the domestic rebar leader has a tricky decision to make about how they want to handle their next pricing move.

Nucor’s raw material surcharge (RMS) for long products, first instituted several years ago to reflect the then-rising scrap costs, has a Program Baseline of $162/nt, which was the price of shredded scrap when the surcharge was first put into place.

The RMS, which is usually adjusted on a monthly basis when scrap prices are rising or adjusted more frequently when scrap prices are dropping, is based on the difference between current scrap prices and the program baseline. Although scrap prices have risen and fallen numerous times in recent years, they have remained well above the $162/nt ($179/mt or $8.10 cwt.) baseline – until now. In the last month, shredded scrap has lost almost half of its value, tumbling down to the current level of $125/long ton.

An announcement from Nucor is expected in the coming days, and since there is no precedent for this situation, it is not clear yet what the industry leader will do. Rather than applying a negative surcharge, however, (based on the current formula, the RMS would be minus $37/nt) it is more likely that Nucor will eliminate the RMS, at least for the time being, and lower its base prices instead. Scrap surcharges, once put in place to help producers recover their high raw material costs, are now doing the companies more harm than good as scrap prices have plummeted. If the company does indeed get rid of the RMS, for the first time in a long time the base price will be the same as the transaction price.

Currently, domestic rebar mills are offering at a range of $37.50 cwt. to $38.00 cwt. ($827 /mt to $838 /mt or $750 /nt to $760 /nt) ex-mill. Based on the additional $75/long ton that scrap prices have fallen this month, Nucor and other domestic rebar producers are expected to lower transaction prices (whether it be by lowering base prices or applying a negative RMS) by a total of $75/nt ($83 /mt or $3.75 cwt.), bringing most offers down to around $34.00 cwt. ($750 /mt or $680 /nt) ex-mill.

On the import side, offers are still substantially lower-priced than the offers from domestic mills. Import offers from Turkey have dropped by about $2.00 cwt. in the last week to a range of $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) duty-paid, FOB loaded truck, in US Gulf ports. Although there are some indications that scrap prices in Turkey are finally bottoming out, the pricing trend is still down due to the weak demand. Import offers from Mexico are slightly above the Turkish price, with most offers ranging from $29.00 cwt. to $30.00 cwt. ($639 /mt to $661 /mt or $580 /nt to $600 /nt), delivered to Houston.

Courtesy: SteelOrbis