This week price increase signals have been observed in the Turkish wire rod market. In particular, with the full return of the southern European market players to the international wire rod market, Turkish mills now have a platform for price increases. Another factor favoring increases in local prices is the steady rise in strength of the US dollar against the Turkish lira throughout the week. It is heard that some mills have increased their sales prices by a small margin due to the change in the $/TRY exchange, and that they also intend to raise their prices further even if a contrary trend is seen in the exchange rate. Meanwhile, it is also heard that with increasing scrap prices adding to the cost of wire rod production, some mills have started to produce directly from billets in order to get through the current period.
On the Turkish producers' side, some mills who do not want to build up their stocks have started to produce at below half capacity and are working on a shift system, while others with lower ouput capacities have not reduced their production operations. Although target export offers show some variety, certain wire rod mills have been seeking to conclude sales above $500/mt FOB for mesh quality wire rod, while others have raised the bar and have tried to sell drawing quality wire rod above the level of $550/mt FOB.
A "wait-and-see policy" has been observed on the end-users' side. It is heard that some end-users who are worried over whether these price increases will be permanent or otherwise have continued to delay their purchases and that others who are in a hurry to deliver orders have continued to purchase only to satisfy their needs. The most important problem facing end-users is the demand contraction seen in the sales of finished steel products. Southern Europe's return to the markets has given rise to the expectation that an improvement may be seen in demand for finished steel. Another point that needs to be considered is how certain end-users will respond to the possible piling-up of orders, especially given their current low wire rod stocks. Some end-users have been delaying their purchases against the background of the continuing instability of prices. If these end-users accelerate their purchases in accordance with the new trend of the market, finished steel producers will not be able to meet their orders. Finished steel producers who have taken this problem into account are now trying to search for possible solutions.
In Italy, whose return from holiday had been long awaited in the international wire rod market, drawing quality wire rod has continued to be sold at the level of €430-440/mt ($569-583/mt) for delivery to customer, excluding VAT, while it is heard that some mills have been offering wire rod below this level. Meanwhile, it also reported that some Italian mills will continue to reduce capacity and work a shift system for a while. It is unlikely that much activity with regard to demand levels will be seen in the short term in the Italian domestic market.
Looking at the import market in Italy, some Turkish producers, who had been waiting for Italy to return to the markets, are currently offering 1008 (mesh) quality wire rod to this country at the level of $500/mt CFR Italy for January shipment, while 1006 (drawing) quality wire rod offers given from Turkey to Italy have been at $540/mt CFR Italy. End-users in Italy are evaluating these offers at present.
As for Spain, another important wire rod market, sales prices of drawing quality wire rod have maintained their levels seen in the pre-holiday period and are so currently standing in the range of €410-420/mt ($543-556/mt) for delivery to customer. However, it is heard that some mills have been offering this quality wire rod at below the levels in question. With regard to demand, a pessimistic atmosphere has continued to be observed in the Spanish domestic market. This week in the market offers given from China to Spain for 5.5 mm (1006) drawing quality wire rod have been reported at the level of $550/mt FOB for January/February shipments.
In general, ahead of any fundamental change in the Turkish wire rod market, end-users need to feel with some certainty that the finished steel market will indeed show a recovery and that demand will support current price levels. End-users may consider adding to their stock levels only if the above conditions are fulfilled, which is unlikely to happen in the short term.