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US rebar market adjusts after Gerdau Long Steel-Commercial Metals deal

  • Thursday, November 15, 2018
  • Source:ferro-alloys.com

  • Keywords:US,rabar market,adjust, Gerdau, deal
[Fellow]US rebar market adjusts after Gerdau Long Steel-Commercial Metals deal

[ferro-alloys.com]The US rebar market is adjusting to the new competitive landscape, one week after Gerdau Long Steel North America completed the sale of four US rebar mills and all 33 of its rebar fabrication locations to Commercial Metals Company.

The deal gives CMC additional annual rolling capacity of approximately 2.5 million st, along with an incremental 2.7 million st of melt capacity, which gives the company an approximate total of 7.2 million st of global melt capacity at the close of the transaction, according to a KeyBanc analyst.

"Gerdau and CMC seem to be merging all of their stuff together, I've got a good bit of contact from those folks as they come together. I don't see it drastically different," said one Southeast US buyer.

CMC is heard to be honoring previous pricing agreements from Gerdau in some cases, but transitioning others to their own pricing immediately. One source said they were switching to daily pricing with CMC from more longer-term agreements the source was accustomed to getting from Gerdau.

"It seems like [transaction changes are] on a case-by-case basis," one Midwest US buyer said. "We're just transitioning a lot of logistical things with [CMC] right now, it's not too bad. If it were the spring, it would be worse." He said he had heard of some employee turnover between the mills during the first week of the transition and predicted more to come as things settle, which he expected to be by the end of the year. "I think there's going to be a lot of duplication [of personnel], in the Southeast especially."

"The Gerdau CMC [deal] is shaking out. They interrupted some shipments but we were prepared for it," one distributor said. "I expect mostly business as usual as this takes shape."

He added that the new market dynamics could be beneficial to distributors who may be able to gain fabrication shop customers, previously buying from both mills, but now looking for an additional source to hedge their supply.

The Southeast buyer agreed about the changes benefiting independents. "CMC and Gerdau kind of had different philosophies about what the mill fab shops were for," he said. "I think they're beginning to see [they] can't sell enough steel to [their] fab shops, they've got to have independents."

"I think going from four major players (CMC, Gerdau, Steel Dynamics Inc. and Nucor) down to three should lend itself to more price discipline in the market," said another Midwest buyer. He said Gerdau fabrication shop customers typically saw softer pricing from the mill: "I'm hoping with the [new] situation they get that reigned in."

The distributor echoed that expectation as well, saying, "CMC have always been a little more disciplined in the fab side."

(S&P Global Platts)

 

  • [Editor:王可]

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