US rod mills have yet to announce any price decreases akin to Nucor's recent $130/nt ($143/mt or $6.50 cwt.) decrease for rebar, but with demand being very weak, scrap prices in a free fall, and import offers getting more aggressive each week, wire rod producers in the US may have no choice but to lower transaction prices.
While temporary fourth-quarter production outages at several rod mills like Keystone and ArcelorMittal Georgetown will help to control supplies, the cutback in production is not likely to stop the bleeding entirely, as import rod offers are over $10.00 cwt. ($220 /mt or $200 /nt) cheaper than most domestic offers.
In addition to the competitive import offers, scrap prices have plummeted in October, with shredded prices down by as much as $150/long ton since last month, and demand on the rod side and on the wire side is at a standstill. With the frozen credit market, no one is buying steel, and there is concern that some customers may not be able to pay for their previously booked orders. Smaller companies that supply to end-use applications are struggling just to stay in business.
On the bright side, because of the constrained domestic production, the US wire rod market is somewhat stronger than the rebar market, and mills probably won't lower rod prices as sharply as rebar prices. However, a decrease of $80/nt($88 /mt or $4.00 cwt.), the amount mills are lowering prices for beams and merchant bars, would not come as a surprise.
For now, domestic low carbon wire rod offers continue to range from $51.50 cwt. to $52.50 cwt. ($1,135 /mt to $1,157 /mt or $1,030 /nt to $1,050 /nt) ex-mill. However, mills are not booked past November yet, and there are virtually no new orders being placed. The pricing trend is strongly down.
On the import side, offers have fallen by approximately $2.00 cwt. ($44 /mt or $40 /nt) since last week, with most import mesh quality offers now ranging from approximately $38.00 cwt. to $39.00 cwt. ($838 /mt to $860 /mt or $760 /nt to $780 /nt) duty-paid, FOB loaded truck, in US Gulf ports. The pricing trend for imports is also strongly down as the world steel markets continue to deteriorate, with Turkish offers being especially aggressive. Offers from China, the other major import source offering to the US, also continue to trend sharply down.
Both import and domestic rod prices are expected to continue trending down until the current financial turmoil is over. Prices may be close to stabilizing if the panic in the markets is almost over, though in these uncertain times it is impossible to gauge exactly when the fear will subside and lending will resume. For now, the economy has yet to find steady ground, and nearly all steel products continue to be offered at bargain prices.