The pricing trend for US mesh and wire products is now slightly up due to the upward trend for import wire rod and wire products.
Import wire rod and wire prices are trending up due to the Chinese government's new export tax on wire and wire rod products. The export tax, valid as of June 1, is 10 percent for wire rods, and five percent for wire. The tax will result in added costs for Chinese mills, which will likely translate to higher priced imports and, possibly, lesser quantities of imports of these products. This action follows the reduction of the elimination of the VAT for Chinese wire rods, which took place in April.
However, the US wire industry still isn't too happy with China. The five percent tax on wire products won't help to curb the mass quantities of import wire products shipped from China to the US every year, as the higher tax on wire rods will encourage China to send even more wire products to the US. Also, there is still no export tax on downstream wire products such as nails, hangers, fence, mesh, tire wires etc. On the contrary, there is a VAT rebate for these products, making it profitable for China to ship them to the US. As a result, over the past few years, Chinese imports have deteriorated the US domestic downstream wire markets, particularly for nails and coat hangers.
For this reason, in late May, five US nail manufacturers filed an antidumping suit against nails from China and the United Arab Emirates. The petitioners allege that imports of nails in the 12 months from April 2006 to March 2007 reached 590,391 metric tons (650,794 net tons), equal to 59 percent of total US consumption. China's market share of US nail consumption during the period of investigation is 40 percent (68.44 percent of all imports).
Data regarding the market share for wire products in general show that about half of all wire products consumed in the US are imported. Data from the American Wire Producers Association show that YTD 2007 (January through March) five percent of the total US wire product consumption came from US mini-mills, while 42.5 percent came from independent US wire drawers. 52.1 percent of the wire products consumed during this time were imports. In 2006, six percent of US wire consumption was from US mini-mills, while 48.5 percent came from independent wire drawers. 45 percent was imported.
Year-to-date May 2007, 300,100 mt of total wire drawn imports were received by the US, compared to 336,300 mt for the same period of the previous year. Next to Canada, China remains the largest import source, shipping 72,900 mt of wire drawn tonnage to the US from January through May 2007, compared to 71,700 mt during the same period of the previous year. AWPA data show that the wire products that are commonly imported to the US, in addition to nails, include wire strand, wire rope, "other and miscellaneous" wire products (which may include wire fencing, wire hangers, etc). Import numbers during January through March 2007 for those products are as follows: wire strand - 71,070 mt; wire rope - 38,679 mt; other wire products - 245,250 mt; and miscellaneous wire products - 2,445 mt.
It remains to be seen whether or not increasing pressure from the US wire market to curb imports will have a large effect in the future, but for now, US wire producers are not getting any major relief. However, the recent legislation for wire rods will push up import rod prices, which should help domestic wire prices trend up for now. Also, there are indications that shredded scrap prices have stabilized, which will also help US wire producers to maintain their pricing. The faltering housing sector, the unpredictable automotive sector, and the depressed US economy in general, are factors which will inhibit any major price increases in the near future.
Imports are not a big issue for the mesh market, except for in Texas, where there are some low-priced offers from Mexico, in some cases less than $50 per roll of 10 gauge mesh. Mesh producers in Houston are reportedly still trying to push through the increases announced for May, but have been largely unsuccessful so far due mostly to the soft demand. The Florida market remains slightly better than the Texas market. Domestic 10 ga. mesh prices continue to range from $53 to $57 per roll, with offers in Texas tending towards the lower end of this range.
Market sources say that the market for six gauge is stronger than the market for 10 gauge, since six gauge is used mainly for commercial construction, which a wire distributor told SteelOrbis this week is "good, but not great." 10 gauge mesh is used for housing, is weaker due to the sluggish housing market. In general, the sentiment in the mesh market is more positive than the wire market, with producers expecting that the price increases announced over a month ago will eventually go through. The pricing trend for mesh is slightly up, due to the rising import wire rod prices.