Despite the deep cuts to US wire rod production capacity and the rise in Turkish offering prices, the US rod market has yet to rebound from its prolonged slump.
Officially, US rod mills have kept their prices stable since last week, but the slow bleed will continue as long as demand remains weak. It is a testament to how soft demand is that, even with all of the steep domestic production cuts and lack of new import material coming into the country, inventory levels remain relatively high.
Most US domestic low carbon rod offers continue to range from approximately $24.00 cwt. to $25.00 cwt. ($529 /mt to $551 /mt or $480 /nt to $500 /nt) ex-mill; however, it remains the case that serious buyers can often negotiate a better offer, especially as import inventory on the ground as well as new production from Latin America can be acquired at an even lower price.
Competitive import offers, primarily from Latin America, continue to range from about $21.50 cwt. to $22.50 cwt. ($474 /mt to $496 /mt or $430 /nt to $450 /nt) duty paid, FOB loaded truck in US Gulf ports. Inventory already on the ground in Houston can also be found at this price or lower. For wire drawers, March sales were better than February but they were still disappointing. Traditionally, March and April are strong months, and so far, April 2009 is shaping up to be another disappointment. As rod inventory consumption is taking place at an unseasonably slow pace, some end-users are trying to sell their rod inventory. Traders say there are a fair amount of transactions transpiring for existing inventories at these low price levels, but there is no demand for new bookings, either from domestic or foreign mills. "The wire rod industry is still in the 'de-stocking' phase," one Gulf area trader told SteelOrbis this week.
Nevertheless, US scrap prices seem to be bottoming out, and Turkish mills are not backing off of their recent longs price increases, both good signs that US longs may soon bottom out as well. And although they are not resulting in any bookings, traders also report a slight up-tick in inquiries in recent weeks. However, until US finished product demand improves and the de-stocking process is complete, the US wire rod market will continue to be soft. At the very least, the market will likely remain quiet for several more weeks.
Turkish rod offers for the US are virtually nonexistent, since, based on the new asking prices from Turkish mills, traders would have to offer the new Turkish material at at least $23.50 cwt. to $24.50 cwt. ($518 /mt to $540 /mt or $470 /nt to $490 /nt) duty-paid, FOB loaded truck in US Gulf ports in order to make money. Nonetheless, Turkish mills have yet to back off from their price increases as their scrap costs continue to edge upwards.
Data from the US Department of Commerce show that imports of wire rod have declined in every month since October 2008, and Turkey, the only major low carbon import source, has been absent from the market since January. License data show that wire rod imports totaled 34,819 mt in March, with the largest import sources being Canada (16,833 mt), Brazil (6,551 mt), Korea (5,679 mt), Japan (3,348 mt) and Germany (1,499 mt). All of these sources are known for high carbon wire rod. While the preliminary total for March is only slightly down from February's 38,322 mt, it is down by over half from the 75,402 mt of wire rod imported in March 2008, and April 2009 is shaping up to be an even weaker month for rod imports, with licensing data collected through April 14 only accounting for 7,001 mt.
