Price hike imminent for US wire rod

With US shredded scrap prices rising by an estimated $65/long ton this month, US wire rod prices are sure to reflect some of this increase. However, it remains to be seen just how far producers will be able to raise prices as demand remains weak.

For now, most low carbon wire rod offers from US producers continue to range from approximately $27.50 cwt. to $28.50 cwt. ($606/mt to $628/mt or $550/nt to $570/nt) ex-mill. However, this range is expected to rise by at least $0.50 cwt. ($11/mt or $10/nt) in the coming days as mills announce January price hikes to reflect the December scrap increase.

While the price trend for US domestic wire rod is now pointing upward, demand remains flat, and therefore, there is no chance that mills will be able to recover the full $65/ton rise in scrap costs. Inventories remain light, but in this market, such an increase to wire rod prices would be "inconceivable" as one trader put it. A lesser hike of approximately half that amount is expected to be announced, and even that will be a difficult sell given the temerity with which buyers are entering the New Year.

As regards imports, after rising by $0.50 cwt. in the first week of December, most offers have remained stable since last week, with most import mesh quality offers from Turkey and China continuing to range from approximately $26.00 cwt. to $27.00 cwt. ($573/mt to $595/mt or $520/nt to $540/nt) duty-paid, loaded truck in US Gulf ports. However, the market has quieted even further in recent days as Chinese mills have retreated from the market. As current import prices aren't really workable in the US market and better prices can be achieved in their home market, Chinese mills are not too interested in exports currently.

On the Turkish side, mills are seeing very little export demand and have indicated within the past week that they are becoming more open to negotiation. Still, no price decreases are expected just yet as scrap costs continue to rise. But in light of the weak orders, the import price trend has neutralized for the time being.

Import licensing data collected through December 8, 2009 show that after spiking to an annual high of 109,320 mt in October due largely to a brief appearance by Turkey, US wire rod imports dropped back down to 66,279 mt in November in the absence of Turkey. November import licenses for wire rod mostly came from: Canada (31,392 mt); Brazil (10,708 mt); and Mexico (6,819 mt) and were about 35 percent lower than the November 2008 total. However, December arrivals appear to be on the upswing again as Turkish tons returned to the market. Through December 8, import licenses have already totaled 46,269 mt, including 14,671 mt from Turkey. Still on the whole, this year has been a quiet one for wire rod imports. In every month of this year except for October, US wire rod imports have remained well under the 2008 average of 90,900 mt per month.