The US wire rod market remains in a frozen state, as domestic mills wait for their production cutbacks to impact the market and for demand to thaw.
On the bright side, domestic rod prices have not seen further declines in the last week, though hardly any commercial activity has taken place due to the lack of demand and the Thanksgiving holiday. Many rod mills have already shut down for the year on extended maintenance or holiday breaks. Mills are not yet offering for January shipments as they wait for the market to recover.
Spot offers for low carbon rod from domestic mils continue to range from $33.00 cwt. to $34.00 cwt. ($728 /mt to $750 /mt or $660 /nt to $680 /nt) ex-mill for immediate shipment. The pricing trend remains slightly down as the weak demand has yet to show any signs of improvement.
On the customer end, there is very little sales interest as customers' inventories are generally sufficient to last them for a while given their own weak sales, and even if they run out of inventory, they only want tons on an as-needed basis.
Additionally, many customers and import suppliers are trying to work out issues arising from quality and transportation claims. Even though there might be the temptation to create phony claims in order to get out of high-priced steel obligations, sellers have some ammunition against such requests. Tight credit and consolidation have left just a handful of traders dealing with wire rod imports, and they typically insure their receivables with just a few credit insurance companies. In this small community, any negative word travels fast, as insurance companies also share information amongst themselves. They are already wary of the recent downturn in the industry and are looking for reasons to cancel or slash credit coverage for delinquent accounts. A cancellation of coverage or blacklisting from these insurance companies could mean significant negative consequences for steel buyers in the future, as the market will eventually bounce back and supply will once again start tightening.
As with the North American rod producers, just about every US wire company has cut production and/or workers, and if the current economic conditions continue, some weaker companies could go out of business.
On the import side, offers have also remained at the same range as last week due to the lack of bookings taking place. With Turkey leading the way with the most competitive offers, most import mesh quality rod can be found at a range of $26.75 cwt. to $27.75 cwt. ($590 /mt to $612 /mt or $535 /nt to $555 /nt) duty paid, FOB loaded truck in US Gulf ports. However, while the majority of offers fall into this range, traders say that foreign rod mill pricing is still a "free for all" and that prices are negotiable or, as one trader put it, "all over the place." Turkish mills' attempted price hike in mid-November did not take, but they are still anxious to sell their tons for nearly any price at which they can find a buyer. Like that for domestic rod, the pricing trend for import rod is still slightly down, as the market faces a steep uphill battle given the current bleak economic picture.
As traders still have some unsold inventory, they are not to keen on making any purchases, even at bargain prices, unless they can back the deal up with a purchase order from customers. Nowadays the favorite import source is Turkey rather than China because of a number of factors including shipping, storage, and a possible change in the export tax situation for Chinese rod.
Recently released Import License and Preliminary Census Data from the Steel Import Monitoring and Analysis System (SIMA) reflect the decrease in overall import rod sales, though tonnage from Turkey is up. November License Data show 82,925 mt of import wire rod for the month, compared to Preliminary Census Data of 105,354 mt for October. The most tonnage in November, according to the License Data (Census Data for November, which is not available yet, may show slightly different results) came from Turkey, with 20,377 mt. This compares to zero tonnage from Turkey in the previous month. After Turkey, the most import rod tons in November came from Canada, at 16,443 mt; followed by Brazil, at 9,767 mt; and Japan, at 6,851 mt.