As US shredded scrap prices posted another decrease this month, so too have US wire rod prices, with domestic offers falling by approximately $20/nt ($20/mt or $1.00 cwt.) in the last week.
Although producers are not expected to issue an official price announcement for wire rod as they will for rebar, wire rod spot prices have, nevertheless, declined in March, with the poor demand being as much to blame, if not more so, as the weakening raw material prices.
SteelOrbis has learned that most domestic, low carbon wire rod offers now range from approximately $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) FOB mill, reflecting a decrease of about $1.00 cwt. since last week. Mill pricing is generally still rather flexible and open to negotiation. Still, while the market is still searching for the bottom, the period of sharp and swift price declines seems to be in the past.
On the import side, in the words of one rod trader SteelOrbis talked to this week, "There is absolutely no activity." Orders continue to be depressed from the lack of demand as well as speculation that prices will probably fall further. Turkey remains the most competitive import source, with most offers of mesh-quality rod ranging from about $24.25 cwt. to $25.25 cwt. ($535 /mt to $557 /mt or $485 /nt to $505 /nt) duty-paid FOB loaded truck in US Gulf ports. With steel demand in Turkey, in the words this week of the country's largest flat rolled steelmaker, Erdemir, "hitting rock bottom," mills are very anxious for export business and are willing to continue to negotiate prices accordingly downward. Other than Turkey, certain South American rod supplies are sporadically offered to customers, with limited acceptance.
On the bright side, China, once the most competitive import rod source, has remained virtually absent from the US import rod market this year, which has helped keep the market from being flooded with cheap imports. After peaking at 53,299 mt in October 2008, US wire rod imports from China fell to 6,091 mt in January 2009 (based on preliminary census data) and further declined to almost nothing (14.5 mt, based on license data) in February 2009. Normally, China is the only viable import source for the US West Coast but the consumption rates have gone down so much that most orders can now be fulfilled by American producers - or worse, from downgraded wire rod inventories of some wire drawers.
The price trend for both domestic and import wire rod is still down as a major rebound in demand in the near future is not looking too likely, and US scrap prices will probably continue to trend down in the near future as well.
On the other hand, there is an optimistic minority opinion that the lack of new scrap generation will cause a swift rebound in scrap prices within the next month or so, and that steel prices will soon follow. But again, most believe that even with the decreased scrap activity and steel production cutbacks, most steel products, including wire rod, will remain relatively weak for some time due to the economic crisis.
Still, despite the overall weak economic conditions, there is some help on the way for US wire rod, arriving in the form of government-funded transportation projects.
For example, while ArcelorMittal's US wire rod production facility in Georgetown, South Carolina will remain shut down through April 6 due to lack of orders, in South Carolina alone $463 million in stimulus funds has been set aside for state highway construction and another $41 million will go to mass transit projects. South Carolina's Department of Transportation Commission has already approved the use of up to $200 million for "shovel ready" projects such as highway resurfacing and rehabilitation as well as bridge replacements and safety improvements. These steel-intensive infrastructure projects and others being started around the country should help boost demand for long products from mills like Georgetown. However, the question remains: will this boost be enough to pull the industry out of the rut that it's in?