US wire rod prices dip under pressure

Wednesday, 05 October 2011 01:50:50 (GMT+3)   |  
       

After a few weeks of tenuous stability, US domestic wire rod prices have begun to slip under the pressures of weak demand and reluctant buyers.

While the weak demand in the US domestic wire rod market is not a new development, it has accumulated a series of side effects that only make the situation worse.  Most significant, sources tell SteelOrbis, is the reluctance of wire drawers and other wire rod buyers to book new orders, instead using up their existing inventory and hoping that the strategy will drive down spot prices further.  This week, at least, it seems to have worked--spot prices are down $0.50 cwt. ($11/mt or $10/nt), dropping the domestic wire rod price range into the level of $36.25-$37.25 cwt. ($799-$821/mt or $725-$745/nt) ex-Midwest mill.

However, demand for wire rod is not completely dead, and once inventories dry up, wire product producers will have no choice but to restock.  This could lead to a small uptick in spot prices if mills sense they have the upper hand, but any uptrend will be minimal and short-lived--sources say there is little to no chance for significant improvement in the US wire rod market for the rest of Q4.

As for imported wire rod, US buyers are expected to follow their recent pattern of disinterest even though Turkish prices dropped in the last week.  The previous price level has narrowed after a $0.50-$1.00 cwt. ($11-$22/mt or $10-$20/nt) drop into the range of $37.00-$37.50 cwt. ($815-$827/mt or $740-$750/nt) DDP loaded truck in US Gulf ports, also narrowing the margin between Turkish import and US domestic offerings.  As such, traders report little activity at this level.

Spanish wire rod prices, on the other hand, have stayed neutral in the last week, still in the range of $37.50-$38.50 cwt. ($827-$849/mt or $750-$770/nt) DDP loaded truck in US Gulf ports.  However, sources say that Spanish mills might increase prices in the near future, as the depreciating euro against the US dollar is beginning to dip too far into their profit margin.


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