The pricing trend for US wire rod remains still slightly up, though buyers say that the upward momentum is more cost-driven than it is driven by demand.
With domestic wire rod mills announcing price increases of $40/nt to $60/nt ($44/mt to $66/mt or $2.00 cwt. to $3.00 cwt.) last month and US cut-grade scrap prices poised to post another moderate gain this month, the pricing pressure for US longs, including wire rod, is still looking slightly up. US rod mills, on the whole, have not been successful in picking up the entire increase (spot prices, on average, have only risen by about $10/nt since the hikes were announced), but producers may take a cue from the US flat rolled mills' strategy of late and announce a September price increase in order to push through the rest of the August increase.
For now, domestic low carbon rod prices in the US continue to range from $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) ex-mill, though with mills' varying degrees of success in achieving their August price increases, there are some offers heard at slightly above or below this price level, depending on tonnage and/or region.
Meanwhile, US wire rod customers say that while prices have been moving on a slight incline in recent weeks, they have not seen a major improvement in demand for wire products, and that the rod hikes are solely due to the rising raw material costs. As inventories have been drawn down by de-stocking efforts – Mike McCall of the Wire Reinforcement Institute said in his presentation at SteelOrbis' Steel Trade Conference of the Americas last week that wire customers' inventories are at a five-year low – mills are confident that the market is finally tight enough to be able to push through some of their increased raw material costs onto the customer. And with imports remaining largely out of the picture and a significant amount of domestic capacity exiting the market in the second half of the year as well (700k tons from ArcelorMittal and 500k tons from Gerdau Ameristeel), customers will likely have little choice in the coming weeks and months but to accept the higher prices the mills are asking for.
Still, while raw material and supply pressures remain in place, US rod demand is not expected to significantly for a while due to the depressed economy -- namely, the weakness of the housing and automotive markets, which are the largest consuming industries for wire. Mr. McCall said that while US rod prices may inch up in the second half of this year and into 2010, he does not expect business to improve until late 2010/early 2011.
Imports are still mostly absent from the US wire rod market, though traders have reported a few decent-sized fixtures from Turkey in recent weeks, as some customers have sought to lock in some tonnage at the current import price level ahead of any possible domestic or import price hikes or material shortages in the coming months. The East Coast especially is feeling the pinch with the closure of two major mills in the area, as is the West Coast, where import penetration has been very low in recent months since the Chinese offers have been priced out of the market. On the West Coast, there is even reportedly some interest in Turkish rod offers.
Nevertheless, 2009 is still expected to shape up to be a very poor import year, with overall volumes continuing to remain soft in the second half. Brian Archer, Trading Manager-Wire Rod & Rebar for Corus International, said in his presentation at last week's Steel Trade Conference that while the US longs markets do seem to have bottomed, import bookings will remain low this year, as customers are still primarily booking only small amounts of tonnage from domestic mills. Still, it remains to be seen how much longer the US mills will be able to meet all of the market's requirements. Meanwhile, import offers from Turkey are likely to rise further this month on rising scrap and billet costs in the region.
Mesh quality import rod prices from Turkish mills continue to range from approximately $25.00 cwt. to $26.00 cwt. ($551 /mt to $573 /mt or $500 /nt to $520 /nt) duty-paid, FOB loaded truck in US Gulf ports. However, certain mills are offering exclusively at the higher end of this range. Traders say there are still some offers from Europe out there as well, though they are priced at least as high as the Turkish offers. Meanwhile, Chinese offers are still significantly higher than the Turkish import or US domestic prices, and are therefore priced out of the market entirely.