Business is looking brighter for the wire industry, with sustainable growth in demand and steady pricing trends uplifting its recovery.
Although the American Recovery and Reinvestment Act was passed back in February 2009, stimulus funds for construction have just started to trickle down to wire companies, who are currently reporting steady increases in demand. The US Department of Transportation alone has already paid out nearly $12 billion in funds as of March 31, but stimulus-funded projects are not entirely responsible for the growth in orders; the private sector has also gained back the confidence to invest in new construction.
Steady wire pricing has also contributed to the uptick in market conditions. Inventories are still much lower than normal, and the less volatility there is in wire pricing, the less reluctant wire buyers are to restock ahead of future orders. After shredded scrap pricing took a surprising sideways move in April and trended down in May, domestic wire rod pricing has remained level since our last report. Likewise, the pricing for 10 gauge wire mesh is still around $62/roll, about the same from April, but nevertheless negotiable for large orders. Scrap is expected to trend back upward as early as June, and mills will probably increase their prices accordingly, but not by drastic amounts. With the new support of construction demand, combined with already well-performing sectors such as automotive and appliances, wire customers should easily accept mill asking prices.
Another interesting development in the domestic wire market is the rumors swirling around about the reopening of ArcelorMittal's Georgetown, South Carolina wire rod mill. The mill was shut down indefinitely in July 2009, putting 245 employees out of work. The president of the United Steel Workers of America Local 7898, James Sanderson, has told various media outlets that the union and ArcelorMittal are very close to reaching an agreement, which could potentially put people back to work within weeks. However, the Luxembourg-based steelmaker has not made any official comment, and various local developers have submitted plans to turn the vacant mill's land into a tourist destination if ArcelorMittal gives up on it. The possibility of reopening is bolstered by the company's recent quarterly reports, boasting a net profit of $679 million for the first quarter of 2010 compared to a net loss of $1.06 billion for the same quarter last year. Additionally, the Georgetown mill has an annual capacity of 750,000 net tons of wire rod, which could be a healthy bump to the currently tight domestic supply if the rumors prove to be true.
While the domestic wire market is doing well, customers are continuously wary of import offers. Turkish wire rod prices shot up in early April only to come back down to Earth as the month wore on, and the uncertainty of import prices combined with long lead times have kept most US wire customers dealing almost exclusively with domestic producers. This week, Turkish wire rod is being offered in the range of $31.50 cwt. to $32.50 cwt. ($694/mt to $717/mt or $630/nt to $650/nt) FOB loaded truck in US Gulf ports, which is only slightly less than negotiable domestic offerings of $32.00 cwt. to $33.00 cwt. ($705/mt to $728/mt or $640/nt to $660/nt) ex-Midwest mill.