US wire rod market may be starting to stabilize

Thursday, 29 May 2008 11:46:40 (GMT+3)   |  
       

Chinese wire rod prices for the US are on the upswing, and with import rods from other sources being priced so much higher than the Chinese and the US prices, customers are biting on the new Chinese offers.

The new price range for mesh-quality rods from China is $51.50 cwt. to $52.50 cwt. ($1,135 /mt to $1,157 /mt or $1,030 /nt to $1,050 /nt) FOB loaded truck in US Gulf ports, with an extra of about $0.75 cwt. ($16.50 /mt or $15 /nt) for 5.5 mm. This new price level for Chinese offers is up $1.50 cwt. ($33 /mt or $30 /nt) from the last round of offers, but is still significantly below import offers from Turkey or Europe.

Although the rod supply situation in the US is currently tight, traders say that customers have been booking the lower-priced Chinese offers that have appeared in the last couple of months, and that we may see an increase in rod shipments towards the end of the summer. One trader told SteelOrbis, "Things are still tight right now, but with no major problems in domestic production and a lot of imports arriving, who knows if things will still be tight by August?"

However, while a lot of Chinese rod imports are set to arrive this summer, there are rumors that the Chinese government may crack down on exports of boron-added rods, which still receive a five percent export rebate and comprise most of the recent bookings. There is talk that this could happen as early as July 1, though nothing has been announced yet. So, it may be that we will only see a temporary surge in rod imports, with the cheaper Chinese offers exiting the market as fast as they appeared.

Then again, we are already seeing a slight up-tick in import rod arrivals from other regions -- Recently released preliminary census data from the US Import Administration show an increase in wire rod imports in April from the previous month and from the previous year, largely due to an increase of imports from Turkey and Germany, which were booked several months ago when prices were more reasonable. Total wire rod imports in April 2008 were 145,798 mt, compared to 75,402 mt in March and 78,723 in April 2007, with the largest import sources being Canada, at 37,878 mt; Turkey, at 35,766 mt (from 0 mt the month previous); Germany, at 32,113 mt (from 11,994 mt the month previous); Brazil, at 16,562 mt; and Japan, at 12,902 mt.

On the domestic side of the rod market, there is talk that after the relentless price increases seen from mills in the first half of the year, things may be beginning to stabilize as more imports start to arrive and scrap prices begin to level off. After rising only slightly in May, shredded scrap prices are not expected to register any significant movement in either direction in June, making it unlikely that domestic mills would raise prices much for July shipments. Current spot prices for domestic low carbon rods range from approximately $50.00 cwt. to $51.00 cwt. ($1,102 /mt to $1,124 /mt or $1,000 /nt to $1,120 /nt) ex-mill, and high carbon offers range from approximately $52.50 cwt. to $54.50 cwt. ($1,157 /mt to $1,202 /mt or $1,050 /nt to $1,090 /nt) ex-mill.


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