Uncertainty over new political reforms and recent tax increases that have driven down construction investments have forced down Chilean domestic rebar prices, sources in the domestic steel market said this week.
The average price level for A630 grade product shrunk during October to around Peso 385,000-397,000/mt ($558-$576/mt), the same level as the end of August, after two attempts to hike the price that temporarily moved it up to Peso 403,000-417,000/mt. All prices are delivered in Santiago and exclude the mandatory 19% IVA tax.
Low demand from construction drove the decline, following the global trend of lowering international steel prices.
A source from a building-materials chain store reported a 3% drop in prices to around Peso 400,000/mt. "The market in general is concerned with new taxes to housing projects," she said, adding that prices are likely to stay unchanged until the end of the year.
Recent political moves are strongly impacting the sector. "Last week the country's president said that the Constitution may change, moreover, there is labor reform -- all of this generates uncertainties that hamper activity," said a trader who sees offer at as low Peso 380,000/mt.
"The slowdown [in Chilean rebar demand] is due to the lowering of the copper price, which impacts all local industries and the economy in general," a source from a distributor said. "The low remaining demand will be very competitive until year-end because there are a lot of imports from Mexico and China," he said. He added that he expects prices to remain flat in the forthcoming months.
"There are only a few projects left until 2015 is over, new investments will only be seen in the first half of 2016," a steel processor source said. "The price situation is quite complicated right now, Mexican rebar is being sold at a competitive price to end users, competition is strong," he added, reporting to see prices at Peso 385,000-395,000/mt.
Chilean domestic rebar market is supplied by two companies: CAP Acero, currently operating only one of two blast furnaces and producing up to 700,000 mt/year of finished steel; and Gerdau Chile, a 530,000 mt/year rebar, bar and rod producer.
