US wire companies have generally accepted the $60/nt July increase in domestic rod prices, and it doesn't look like the upward price momentum is over yet.
Although they are not happy about it, wire drawers have accepted the higher prices from domestic mills because, quite simply, they have no choice. With new import prices trending much higher than even the new domestic price, rod buyers in the US have no cheaper alternative to the domestic offers.
Taking into account the $60 /nt ($66 /mt or $3.00 cwt.) price hike, domestic low carbon rod offers for shipments as of July 1 will range from approximately $54.00 cwt. to $55.00 cwt. ($1,191 /mt to $1,213 /mt or $1,080 /nt to $1,100 /nt) ex-mill, while high carbon offers will range from $56.50 cwt. to $57.50 cwt. ($1,246 /mt to $1,268 /mt or $1,130 /nt to $1,150 /nt) ex-mill (though it is likely that large buyers may be able to get deals at slightly under this range).
What's more, market insiders say that mills plan to raise prices in August as well in order to get their prices even closer to international levels. Therefore, despite the lack of upward momentum in the US shredded scrap market, which usually dictates the movement of domestic rod prices, the pricing trend for domestic wire rod is still pointing upward.
On the import side, though not all Chinese mills have announced their new pricing yet, some mills have announced major price increases for their rod offers to the US. Most mills also ask their traders to share the risk of an export tax increase, which could mean price increases of hundreds of dollars per metric ton if the tax changes for boron-added rods. There is a lot of boron-added rod shipping in July ex-China, so traders are anxious to get their shipments out before a possible change in the export tax is announced.
Despite the increase in US prices, no purchases have been made yet at the new price level from China, although traders are already raising their numbers in anticipation of the new Chinese pricing. For now most spot offers for low carbon Chinese wire rod currently range from approximately $52.50 cwt. to $53.50 cwt. ($1,157 /mt to $1,179 /mt or $1,050 /nt to $1,070 /nt) FOB loaded truck, in US Gulf ports, up $1.00 cwt. ($22 /mt or $20 /nt) from last week. These offers are based on the July shipments that were fixed a few months ago; the pricing range based on Chinese mills' new offers will be up by approximately $4.00 cwt. ($88 /mt or $80 /nt) from that level.
A rod trader told SteelOrbis this week that he expects the new pricing plateau for Chinese rod to top out at $57.00 cwt. to $59.00 cwt. FOB loaded truck, in US Gulf ports, unless the Chinese government plugs the export tax loophole for boron-added rods, in which case prices could rise even higher than $59.00 cwt.