The US wire rod market has continued to soften in the last week, and even as import prices continue to fall, there is still virtually no buying activity taking place.
Chinese offers for boron-added rods have continued to decline, with most offers now ranging from $50.50 cwt. to $51.50 cwt. FOB loaded truck in US Gulf ports. However, SteelOrbis has heard of some offers below $50.00 cwt. that are still not gaining any traction.
It is even observed that some Chinese billet prices are more expensive than the average Chinese rod price. China's domestic rod price now seems to be stabilizing somewhat, though the pricing trend for rod offers to the US remains strongly down.
In legislative news, or lack thereof, the rumored tax change from the Chinese government that was expected to be officially announced September 1 did not take place after all, though there remains a strong possibility that it will still occur sometime this month.
Meanwhile, offers from Turkey, which were sky-high just about a month ago, have softened almost to the level of the Chinese offers, as their main market, the Middle East, has slowed down, and there is no business from Europe either. Still, no one is biting on these offers, even though they would have been a steal just a few weeks ago.
Buyers are waiting for the market to bottom out before making any purchases. Since business is pretty quiet on the wire side as well, most wire drawers have sufficient inventories for the time being and can afford to wait out the current downtrend before buying again.
Sellers, of course, hope that the current market softness will be short-lived, and looking at the continued low levels of rod import arrivals to the US this summer, they may just be right. Customer inventories may be sufficient for now, but they are not as large as they have been in previous market downturns due to the relative lack of imports this year.
Preliminary Census Data from the US Import Administration show that wire rod imports decreased slightly in July from June, and continued to be down from 2007 levels. Rod imports in July totaled 84,049 mt, down from 107,118 mt in June, and down from 138,325 mt in July 2007. In July '08, the top import rod sources were Canada (31,292 mt), China (15,172 mt), Brazil (10,797 mt), Japan (9,736 mt) and Malaysia (6,537 mt). License Data for August show only 48,074 mt of rod import license permits (though the Census Data, when released, often show a slightly higher number).
As for the domestic rod market, conditions are still very soft, but mills are still holding their prices steady. Mills are trying to keep their prices up in the face of falling import prices and spiraling scrap prices; however, this may turn out to be a losing battle given the sharp dive that scrap prices are expected to take in September.
Scrap dealers are telling SteelOrbis that shredded scrap prices could fall by as much as $160 /long ton this month. Although rod mills do not typically make an official announcement when they lower prices, they will have a hard time keeping transaction prices up if their raw material costs decrease significantly, despite the continued domestic production problems.
For now, domestic prices continue to range from $55.50 cwt. to $56.50 cwt. ($1,224 /mt to $1,226 /mt or $1,110 /nt to $1,130 nt) ex-mill for industrial quality low carbon and at around $58.00 cwt. to $59.00 cwt. ($1,279 /mt to $1,301 /mt or $1,160 /nt to $1,180 /nt) ex-mill for high carbon.