The bump in US rebar spot prices during Q4 2013/Q1 2014 could be short-lived. including Iraq, UAE, Yemen, Saudi Arabia, Israel, Libya and Ethiopia. In order to gain greater market share in those areas, Turkish mills might have to offer competitive pricing, which would only be possible by keeping raw material prices down. And if they are not able to negotiate low-enough prices from US scrap producers, than even more of Turkey’s scrap supply will have to be sourced elsewhere, making an even greater dent in the US export scrap market.
The Eternal Struggle of Supply and Demand It is well known that the US consumes far more steel in general than it produces domestically, leaving imports to pick up the slack— according to the American Iron and Steel Institute, the import market share was 22 percent in November. And judging from perspectives across the US supply chain, including a bullish outlook for 2014-2015 from Gerdau CEO Andre Gerdau Johannpeter in a conference call in September, demand for rebar in the US is slated to strengthen. But if
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Turkish and Mexican rebar imports are out of the picture, will that inspire US rebar mills to increase capacity utilization to fulfill the US market’s demand? Probably not. “More production means more supply which means lower prices,” said one Midwest rebar distributor. “Mills have worked too hard to get prices where they are now to let them slip.” Distributors in the US are also the beneficiaries of high mill prices, but their end-use customers might not be so agreeable to a supply squeeze. In that event, distributors foresee the rise of alternate import sources. As mentioned before, several rebar-producing countries stepped up to the plate during fall 2013 when Turkish and Mexican mills came under a cloud of antidumping suspicion, although their price ideas were nowhere near attractive enough to take Turkey and Mexico’s place. However, if the void they leave becomes more than a temporary situation, it’s very likely that US customers will turn to Portugal, Spain, Korea and the rest even if the margins between their offers and US domestic spot prices aren’t exactly wide. And as the law of unintended consequences dictates, the effect of increased rebar exports to the US from those countries—and necessary increase in scrap consumption— could have a subsequent impact on the US scrap market. Taiwan is the US’ number two destination for export scrap, followed by Korea in the number three spot. Increased rebar exports to the US could mean increased scrap imports from the US, although from the West Coast, not the East Coast ports that serve Turkey. How much influence West Coast export scrap prices have on the general domestic US scrap market is debatable, but market dynamics could shift with export volumes. Of course, nothing will be clear until the DOC ruling in February, and even then, the ripple effects of a ruling either way will take time to absorb in the market. While it’s unlikely the DOC will find no injury in its final determination, there’s always the possibility that final AD/CVD margins will be so low that Turkish and Mexican mills will continue to offer rebar to the US, at only slightly higher price points. And in that case, there’s always the possibility of another import flood Volume 7; Issue 1
in a future first quarter, rendering the US import landscape as abundant then as it is bleak SO now. \
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westward. And while US domestic rebar mills have made a concerted effort in 2013 to divorce rebar transaction price trends from monthly scrap price fluctuations, customers are still aware of raw material trends and will not be as willing to absorb price increases if they know scrap prices are weak. erefore, the bump in US rebar spot prices during Q4 2013/Q1 2014 could be short-lived. By Q2 2014, export scrap’s ripple effect could solidify, dragging US rebar prices down despite mills’ efforts at pushing up the market with import scare-tactics. ere are also consequences that might not have an immediate effect in the US market, but could make an impact later once global dynamics come into play. As mentioned above, Turkey could very well maintain rebar production levels and offload the excess to other destinations. Aside from the US, Turkey sends most of its rebar to the MENA (Middle East, North Africa) region,