US wire and mesh prices continue to rally upwards, with producers of both products hiking prices $30 /nt to $40 /nt in December and planning similar increases in the first quarter. Demand for these products, however, isn't improving as fast as the prices are.
With wire rod prices headed steadily up, wire drawers have no choice but to insist on these increases despite the lackluster demand. And with no cheap import alternatives available, customers will have no choice but to pay them.
Mesh prices rose to $60 per roll of 10-gauge building mesh in Texas after mesh makers raised their prices as of December 1, citing higher raw material costs, namely domestic wire rod producers' $30 /nt price hike for January deliveries. Similar increases have taken place in the Florida market and West Coast market.
US wire prices have also come up significantly in November and December, though sources say that Chinese wire imports are now more expensive than domestic due to the VAT rebate cutback for these products as well as the high ocean freight rates.
Domestic wire makers are still worried, however, about finished wire imports, which are still subject to the five percent VAT rebate and are in many cases cheaper to import rather than to produce in the US. While finished wire import prices have risen in recent months because of the high ocean freight rates, they are still cheap enough to pose a threat to the domestic wire. Still, there is a good chance that the VAT for finished wire products will be reduced or eliminated as well. Due to the Chinese government's recent steps in removing export incentives to appease the US, many people are of the opinion that it is only a matter of time before all Chinese VAT rebates will be eliminated, and even an export tax may be added on wire and wire products. Changes are expected to take place as early as January 1.
As for demand, consumption of both wire and mesh in the US is expected to remain flat next year as well, due to the overall weakness of the economy as well as the housing crisis. This puts the domestic industry in a bind as demand is not necessarily strong enough to support price increases, and yet raw material prices are going up due to stronger demand elsewhere in the world.
A wire drawer told SteelOrbis this week, "The problem we have in this country is that wire rod costs are going up, but demand for wire products is very weak. So we need to force the wire price up despite the slack demand or we will have serious margin problems and some wire companies will go out of business."
For now, with wire drawers unwilling and most likely unable to back down from their announced price increases, it seems that customers are grudgingly accepting the increases, though sales volumes are reportedly weak.