Producers of US building mesh are in fierce competition as they fight for customers during this slow market period. Meanwhile, domestic wire makers are holding the line on prices despite the soft demand.
Though mesh demand and prices have been sluggish since the beginning of the year, for several months now domestic mesh makers have wanted to raise prices because of the high priced rods they are receiving to their inventories. On the other hand, business is very quiet and competition is fierce, so any robust price increase for building mesh is highly unlikely for the next several weeks. Therefore, the pricing trend for mesh is neutral. These two opposing factors will continue to remain at play in the short term as demand continues to drag and the higher priced rods in inventory are converted into mesh. If any price changes in domestic mesh offers occur in the medium term, it is possible that they will increase slightly if wire rod prices register another increase. It remains to be seen whether demand will improve to the point that the market would accept a price increase for wire rod or for mesh.
However, no significant signs of a turnaround in demand have been seen yet.
Sources say that the domestic market price for a roll of 10 gauge mesh is currently at a range of $52 to $55 per roll, with most transactions being concluded on the higher end of the range.
The domestic wire market is stable as well, though business remains soft. Most wire companies are reporting sales down 20 to 25 percent compared to 2006 levels.
Still, domestic wire drawers realize that dropping prices won't result in new orders and there is discipline among the wire producers to keep prices stable. The pricing trend remains neutral for now.
The US is expected to see an increased amount of Chinese wire and wire product imports as a result of the restrictions put on Chinese wire rod exports. These restrictions encourage the export of more downstream wire products, as these wire products are only subject to a five percent export tax (compared to 10 percent for wire rod). Some downstream products aren't subject to export taxes at all and, to a certain extent, have a VAT rebate. As we mentioned in our wire rod report, some domestic wire drawers are finding it cheaper to re-sell imported wire products to their customers - adopting the motto, "If you can't beat them, join them."
But despite the anticipated increase in wire and wire product imports from China, sources say that prices for these items are currently going up, getting closer to import offering prices from Latin America, most likely in reaction to the Chinese VAT rebate reduction for most wire products, such as nails, springs, strand, ropes, and screws. The VAT rebate for these products were reduced from 13 percent to five percent as of July 1st, adding additional costs to Chinese wire product exports. Also, last month's filing of an antidumping and countervailing duty suit against Chinese nails should at least help stabilize the nail market segment. However, in the long run, the fear among domestic wire makers is that the increased flow of Chinese wire and wire product imports will ultimately result in lower prices, causing more damage to the domestic market.