Month End Rebar Comments
As June closes, so does the first half of the year. Many would agree that while demand is not terrible, the spark that everyone expected for 2025 has failed to materialize. Tariff uncertainty and trade cases have cast a shadow on supply costs, and many suggest that that has stalled demand. Supply is very tight currently as we start the second half of the year. An unexpected increase in the 232 tariffs in June evaporated what little stock was in the pipeline, and the import vessels that had been scheduled to arrive now contain material that is subject to a much higher duty rate than originally expected. Most expect that the supply situation will improve as new supply comes on-line and with demand at the higher prices showing signs of fatigue.
Domestic mills have very little inventory on hand to end June, and most report July rollings are sold out. The increase is expected to fully “stick” as we head into July, and why would anyone expect mills to come off it? With little threat of imports and tight supply, whispers of a potential increase have started. However, mills may give pause as scrap has not increased, and raising prices further may appear “opportunistic.” Mills have been able to recapture their margin with the latest move, and further increases would ultimately come at the expense of downstream customers’ margin. Scrap’s reluctance to increase sends a strong message as to how strong demand really is. Mills have not increased their needs for raw materials recently from prior months. Mills will need to rely on their current customer base as new supply comes online and provides other sourcing options. To hammer further price increases now might not be the best look moving forward…. Still… there is the old saying “make hay in the summer…” So who knows?
On the import side… everything remains at a standstill. The material in the pipeline before the increased tariffs had little to no time to react to the increased costs. Importers are asking for the full increase, but with domestics only coming up $60/ton, that leaves the new costs on imports higher than domestic in many cases. The market in the US currently offers little incentive for new cargos to be booked. The lowest-cost producers also face trade cases that will only further deter imports from coming in. There is some discussion that Mexico and the US may come to an agreement to remove the tariffs on some specific volumes; however, any exact details have not been finalized, and that situation does not currently impact the market to any significant degree.
On the scrap front, most are expecting a sideways move for July. With stronger demand and higher prices, one would expect the scrap dealers to try and seize an opportunity to raise pricing. However, over the last several weeks, that does not appear to be the case, and the best guess as we start the trade this week for July is a sideways move. In addition, global scrap prices are trending sideways to softer, which only paints a similar picture. We will update you when the final number is posted.
In the meantime, have a great holiday week and a happy and safe 4th of July.
