From a distributor standpoint, what are the strongest end-users for rebar right now? What are the weakest? FB: Our strongest sector has been agriculturerelated and our weakest has been government-related work—road work is down due to limited funding being released, and I don’t foresee any significant changes this year compared to last year.
With similar end-use applications, why do you suppose rebar demand is so strong whereas low-carbon wire rod demand is relatively weak? FB: My opinion is that wire rod has always been tied to more consumer-related consumption which is starting to do better, how-
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Do you think that was a wise move? How has that affected your buying decisions? FB: Yes—I thought it was wise to remove the surcharge since the mills would adjust pricing based on market conditions versus scrap fluctuations. Scrap is still a great indicator of pricing pattern evolution, however; we operate in a market where there are no official published prices on rebar, therefore, the value of the scrap surcharge became irrelevant.
ever, there are still a lot of wire rod imports entering the US market which make it challenging for the mills.
Do you foresee US domestic rebar mills increasing capacity utilization anytime soon? Why or why not? FB: I do see some of US domestic rebar mills taking efforts to increase their capacity utilization. My concern is that if it will be enough to supplement the imports that will be removed from the supply chain and in which regions that the increase capacity utilization will be able to get to. One particular region that we should start to see some production increases will be on the West Coast, however, I am concerned that it will be enough as the West Coast market was one of the worst markets hit by the recession. In result of this, this is typically a symptom of one of the strongest recoveries. Do you think a West Coast revival will just involve existing mills increasing output? Or is this an opportunity for other steel producers to set up shop in the west? FB: I believe it will involve just existing mills increasing output—I don’t see anyone else looking to set up shop in the West Coast.
Around mid-2013, US mills tried out a new strategy of “divorcing” their pricing from scrap, thus the end of the monthly RMS letter with corresponding base price policy. Volume 7; Issue 1
Do you expect the US DOC and ITC to rule in favor of US mills in the upcoming trade case against Turkey and Mexico? If so, how will that affect the availability and price of US domestic rebar? FB: Yes—I do expect them to with Turkey, but I have always found Mexico to operate like a domestic mill would. Turkey’s pricing has set a floor for the US market which has always been a barrier as to how far the US mills can raise their prices without inviting more tons to the market. Mexico’s pricing has typically moved in sync with the patterns of US mill announcements or in many cases, ahead of them. e one key thing to recognize though is that some of the US mills will downstream operations, driving domestic prices down lower than import prices were actually at so that is the only argument that I can really see working against them. Other countries will start to enter the supply chain though because as domestic prices escalate, we become more attractive to the global market. Furthermore, the US economy is still one of the strongest in the world.
Do you think the disputed sources will find some way to get back into the market? Or are they likely to abandon the US as a major rebar destination? FB: I believe that they will and the surge of bookings that were set for January arrival is validation of the dependency. I am sure they are trying to find additional channels to move their tons, but it is hard to just lose the US as a customer when we are consuming 1 million plus tons of import rebar per year. How does your perspective of the trade case, as an independent distributor, differ from that of a mill-affiliated distributor?
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Interview
Rebar in the US seems to be having a “moment” right now—what are your thoughts on current demand? Do you have a forecast for demand in Q1 2014? FB: Current demand is trending upward as we enter 2014. Reduced consumption has been expected for the seasonal slowdown which we are seeing in our sales volume; however, the perception of increased prices is going to keep customers bullish throughout at least the first quarter of 2014. Domestic mills have been working toward changing the way their customers buy steel and forcing a forward-looking approach. To achieve this, mills are not rolling outside of booked orders—they are controlling orders in an effort to make sure tons are sold fairly based on historical trend. If you don’t book on a rolling, the chance of seeing floor stock available is slim to none. When you have been used to habitually buying from floor stock and you can’t anymore, it will force those to start planning ahead. Also, there is the unknown of reduced capacity with the AD suit and with increased demand, the question lingers as to whether domestic mills are going to increase their production enough to support it. Simple economics are already taking place in our pricing which is why we are seeing small incremental price adjustments. I do believe the domestic mills are attempting to take the market up in a responsible fashion; however, I am concerned about their ability to increase production to balance with demand.