US wire rod market - Domestic price increase is imminent

Import prices for wire rod have improved significantly since last week, as domestic supplies are tight and offering prices from foreign mills, Chinese mills in particular, are still on the rise. Mesh grade import offers have improved by $0.50 cwt. ($11 /mt or $10 /nt) since last week, now ranging from $23.50 cwt. to $24.50 cwt. ($518 /mt to $540 /mt or $470 /nt to $490 /nt) FOB, loaded-truck, in US Gulf ports, and drawing quality offering prices have increased by $1.00 cwt. ($22 /mt or $20 /nt) since last week, now ranging from $25.00 cwt. to $26.00 cwt. ($551 /mt to $573 /mt or $500 /nt to $520 /nt) FOB, loaded-truck, in US gulf ports. In recent weeks, Chinese prices had been moving up slowly, but we are now seeing a sharp increase in Chinese pricing because the Chinese government is expected to reduce the refund rate of the value added tax for exports of steel items other than semi finished from 11 percent to 5 or 6 percent. This news has prompted many Chinese mills to raise prices. Another contributing factor to rising import prices is the Sicartsa strike in Mexico. As the strike continues, many South American producers are still redirecting their wire rod shipments to Mexico instead of the US, restricting US supplies and pushing up prices. It has been reported that even some domestic wire rod mills, for example, Gerdau Ameristeel in Beaumont, Texas, have been sending rod shipments to Mexico to help meet demand there. However, this tight market situation could unravel when the strike eventually ends. Strong demand is another reason why import prices are improving. Demand for mesh is especially strong, in the US and worldwide. Inventories are unusually low, as mesh manufacturers are shipping to customers right away. Some mills are booked until the second week in June. Robust demand and tight supplies are also putting pressure on domestic prices to rise. Industry experts agree that we will see a significant price increase in June, of at least $20 /nt ($22 /mt or $1.00 cwt.) Major wire rod producer Keystone Steel and Wire confirmed with SteelOrbis today that it will raise its prices by $40 /nt ($44 /mt or $2.00 cwt.), effective July 1. Of course, it remains to be seen whether or not the market will accept such a large increase. This week, domestic offers still range from $26.00 cwt. to $27.00 cwt. ($573 /mt to $595 /mt or $520 /nt to $540 /nt) for low carbon FOB mill, and from $28.50 cwt. to $30.50 cwt. ($628 /mt to $672 /mt or $570 /nt to $610 /nt) for high carbon FOB mill. But the pricing trend is strongly up as the announced price hikes will be implemented.