The US wire rod market is starting to firm up as inventories are slowly emptying out.
Although demand is still lukewarm, inventories, both at the ports and among downstream wire rod consumers like wire drawers, continue to shrink. Additionally, Gerdau Ameristeel has announced that it will permanently close its Perth Amboy, New Jersey wire rod mill. This mill has a annual capacity of 900,000 tons of wire rod from 7/32” to 25/32” (5.5 mm to 20 mm). This is the second major wire rod mill on the East Coast that will close -- ArcelorMittal Georgetown, a 750,000 ton per year mill is also facing a long term, if not permanent shutdown, pending internal results of union negotiations. Insiders do not believe a resolution will be reached prior to planned closing date of July 12.
Despite the gloomy production news, transaction prices of domestic orders have not yet increased and low carbon rod prices continue to range from approximately $24.00 cwt. to $25.00 cwt. ($529 /mt to $551 /mt or $480 /nt to $500 /nt) ex-mill; however, mills are taking a firmer stance on pricing and are not as willing to offer discounts from this price anymore as they have gained increasing price control due to the lack of imports and low levels of domestic production. Furthermore, US shredded scrap prices are expected to trend sideways in June, so there should not be any downward pressure on wire rod coming from the raw material side. Taking these factors into consideration, even though there was no concrete increase since last month's $35/nt ($39 /mt or $1.75 cwt.) price increase announcements by US mills, the pricing trend for domestic rod is slightly up.
On the import side, things are firming up as well, with the price trend for imports now pointing slightly upwards. Although Turkish rod offers were trending slightly down last week, Turkish mills have since increased their price expectations due to an up-tick in bookings from other markets and an increase in their domestic longs prices. Scrap prices in Turkey are also slightly up. Traders that approached Turkish mills last week to negotiate lower rod prices were turned down and this week, were actually quoted higher numbers than last week. Ocean freight rates are also trending up, which will also be passed onto import rod prices.
For now, most import rod offers continue to range from about $23.50 cwt. to $24.50 cwt. ($518 /mt to $540 /mt or $470 /nt to $490 /nt) duty-paid, FOB loaded truck in US Gulf ports. Traders note an increase in inquiries in the past week as customers are getting the feeling that the market is bottoming.
SteelOrbis heard that some smaller rod buyers are seeking to replenish their inventories from certain larger wire rod consumers’ inventories. But inventory sales are also becoming less frequent while sales prices for these transactions are increasing. The increased transaction prices of inventory sales indicate that wire rod supplies have been drawn down further in recent weeks, which will lend both the domestic and import markets more strength going forward.