As January draws to a close, the rebar market looks ahead to some potential volatility. The month of January saw a $30/ton price increase announced by Nucor, which was immediately followed by all the other manufacturers. Poor weather and slow seasonal demand in January served to slow the implementation of the increase throughout the month, but by the end of the month, most report that the increases are in place, and eyes are looking at the month ahead with potential tariffs and increased scrap costs serving to further strengthen pricing in the rebar market.
The new administration has warned of implementing 25% tariffs as soon as tomorrow, Feb 1st on Mexico and Canada as well and an additional 10% on China. There are different opinions on if these tariffs will indeed be implemented, on how they would be implemented, and on what products they would impact. If they are implemented, the greatest impact on the rebar market would be on rebar imports from Canada and Mexico, which combined export approximately 300-400K tons annually to the US. While that volume is less than 5% of the overall US rebar consumption, a 25% tariff could immediately wipe that volume out of the market and, in certain regions and lanes, create a short-term shortage.
The tariff threat is also impacting other steel markets to a larger extent than rebar, causing increased demand on the domestic mills and consequently a larger than expected demand by those mills for scrap. Add to it the extreme weather through most of the US in January, which curtailed collections; a scrap increase for February is now likely. Most expect another $20-30/ton increase for February, which follows the $20/ton increase from January. Some regions and markets that were affected more by the weather conditions in January; the increase may even be more. While buyers are quick to point out that the size of the first increase in January exceeded the scrap increase last month, if the February scrap pricing is strong enough, mills may look to try another increase.
Globally, mills are once again looking to the US market as a possible export opportunity with the new price increases, especially the mills that are outside of North America. Mills that have been non-competitive for the past several months are closely watching the US price to see signs of opportunity to deliver to the US markets. Any increase in the US market price could only serve to entice buyers to look once again at import rebar channels. Lead times remain 4-5 months for imported material, so enough price cushion is required to merit the risk. January did see some new imports booked, and with additional mill price increases a possibility, it would likely encourage additional imports booked in the weeks ahead. No doubt domestic mills will wager that into their pricing decisions as well as they move forward.
The month ahead looks to be ready to serve up some interesting developments in the rebar market. Your friends at Adelphia Metals will continue to keep you posted on any developments that may happen. In the meantime, have a great weekend!