Despite the continued softening of the US wire rod market, US mills are still holding firm on their prices. However, they are not yet quoting for fourth quarter orders - not to mention that customers aren't even asking for tons yet.
Officially, most domestic rod mills will likely opt to maintain their prices as long as they can rather than lowering their numbers along with the weakening scrap prices and softening import offers. One mill, Gerdau Ameristeel, has even officially stated to customers that it will keep pricing for all products stable through the end of the year.
On the other hand, while the mills are not re-negotiating old deals, they really don't have any new business as there are no fourth quarter bookings taking place. The lack of sales activity makes it very apparent how soft the market is. Once they do re-enter the market, the mills may have to "face the music" and do some deals at lower than published prices in order to get any new business at all. Several US mills will have outages in the fourth quarter, however, which should tighten supplies to some extent and potentially help prevent prices from taking a nosedive.
Currently, domestic rod offers continue to range from $55.50 cwt. to $56.50 cwt. ($1,224 /mt to $1,226 /mt or $1,110 /nt to $1,130 nt) ex-mill for industrial quality low carbon and at around $58.00 cwt. to $59.00 cwt. ($1,279 /mt to $1,301 /mt or $1,160 /nt to $1,180 /nt) ex-mill for high carbon (there are no new transactions being concluded at these price levels, though).
Meanwhile, prices continue to soften on the import side, reflecting the weak rod markets worldwide. China and Turkey are offering the most competitive deals, with European sources trailing not far behind. Traders tell SteelOrbis that there are a lot of cancellations globally, so other regions are pouncing on the US market to try and get rid of some tons (much of which are of Chinese origin). Therefore, the import spot price continues to trend down.
The import price for mesh-quality Chinese and Turkish rods now ranges from approximately $44.25 cwt. to $45.25 cwt. ($976 /mt to $998 /mt or $885 /nt to $905 /nt) FOB loaded truck, in US Gulf ports. However, there are very few transactions taking place, so it is as of yet unclear if prices will settle in at this range.
Although the market dynamics are such that import rod prices in the US market should continue to soften in the near term due to the lack of buying activity, there is one thing that could turn around the price trend, and that is a change in export tax and/or VAT rebate policy for boron-added rods from the Chinese government. The boron-added rods that China is currently offering for export avoid the 15 percent export tax for wire rods because the boron-added rods are considered "alloy", and the rods also are subject to a 5 percent VAT rebate for the same reason.
There have been many rumored tax change dates that have come and gone, but an official announcement on this issue has yet to be issued. However, it is still generally expected that it will take place sooner or later, especially now that the market is softening and China is exporting more. If the VAT rebate is removed, the market probably will not feel a very big impact since it would only make a 5 percent difference; however, if the 15 percent export tax is added as well, Chinese rod mills may not be able to export competitively anymore. As for the other major rod exporter to the US, Turkey, while a sharp rise in Chinese prices would not affect Turkish prices directly, Turkish mills would raise their prices to match the new market level, thus reversing the downward price trend we are currently seeing.
License Data from the Steel Import Monitoring and Analysis System (SIMA) show that import licenses for wire rods were down from both July License Data and July Preliminary Census Data. In August, import wire rod License Data totaled 53,423 mt, compared to July License Data of 79,311 mt and July Preliminary Census Data of 84,049 mt. The most import wire rod licenses in August came from: Canada, at 26,771 mt; China, at 13,700 mt; Japan, at 7,533 mt; Brazil, at 2,619 mt; and Germany, at 1,211 mt.