US wire rod market – Domestic prices still trailing behind imports

Domestic wire rod prices in the US are still trending up, with prices expected to rise by at least another $30 /nt to match the mills' announced increases. But with the relentless increases of foreign prices, the gap between domestic and import wire rod pricing will remain disproportionately high.

So far, only about $20 /nt of the $50 /nt increase that the major US mills announced for March shipments has been absorbed by the market, but the remainder of the increase is expected to eventually go through, as import deals are currently being concluded at much higher numbers than the current domestic level.

Low carbon rod offerings from domestic mills currently range from $36.00 cwt. to $37.00 cwt. ($794 /mt to $816 /mt or $720 /nt to $740 /nt) FOB mill and high carbon offers range from $38.50 cwt. to $39.50 cwt. ($849 /mt to $871 /mt or $770 /nt to $790 /nt) FOB mill. Mesh quality wire rod prices range from $35.00 cwt. to $36.00 cwt. ($772 /mt to $794 /mt or $700 /nt to $720 /nt) FOB mill.

There are still worries among wire drawers that there will be a shortage of rods in the market since domestic availability is limited. Therefore, customers are in many cases turning to imports to meet their rod needs even though the foreign rod prices are significantly higher than domestic. The gap between domestic and accepted import orders is in some cases over $200 /nt ($220 /mt or $10.00 cwt.), which was unimaginable just a few months ago.

Scrap prices, the domestic mills' main justification for raising prices in recent months, are no longer going up. But when considering the import prices that are being accepted in the market and the lack of available material, domestic mills still have a lot of room to raise their prices, regardless of the scrap price.

Currently, most import rod offers have been withdrawn from the market with foreign mills gearing up to hike prices for the US along with the rising US domestic prices and rising prices in their home markets. New prices from China, Turkey, and Germany will be out in the coming weeks, and they are all expected to be strongly up.

The few existing offers available, most of which are from Turkey, have increased by $1.00 cwt. in the last week, with the level of accepted offers for mesh quality rods now ranging from $39.50 cwt. to $40.50 cwt. ($871 /mt to $893 /mt or $790 /nt to $810 /nt) FOB loaded truck, in US Gulf ports. Import drawing quality rods now range from $41.25 cwt. to $42.25 cwt. ($909 /mt to $931 /mt or $825 /nt to $845 /nt) FOB loaded truck, in US Gulf ports.

West Coast wire drawers feel the pinch more than their East Coast counterparts, perhaps due to the limited amount of domestic mills in that region and China's absence leaving a huge hole in that market. Spot import prices on the West Coast are reported to be significantly above the Gulf levels.

Preliminary census data from the US Import Administration show that in January 2008, the US' wire rod imports totaled 87,139 mt, compared to 186,127 mt imported in January 2007. The US' top wire rod import sources in January 2008 were: Canada, at 43,264 mt; China, at 14,666 mt; Brazil, at 14,304 mt; Japan, at 7,407 mt; and Turkey, at 4,727 mt.