US wire rod mills have raised their prices for July shipments, and with the domestic market being as tight as it is, getting customers to accept the increase should be a "slam dunk."
Shredded scrap prices, which mills had been citing as the justification for raising their prices in the first half of the year, actually dropped this month - to the tune of $25 /long ton. Despite, the decrease in raw material costs, however, domestic mills, including ArcelorMittal, raised their rod prices by $60 /nt ($3.00 cwt. or $66 /mt) for July shipments, telling customers that the move was necessary in order to bring US prices closer to international levels.
Though it could be argued that the reason why prices are higher in other regions is due to the higher demand in those regions than in the US, with the lack of import options in the US market, rod customers will have no choice but to pay the higher prices domestic mills are asking for.
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. It is likely, however, that large buyers will be able to get deals at slightly under this range.
On the import side of the market, Chinese mills are still the only sources offering competitively, though even China may not be very competitive for much longer - insiders say that Chinese mills plan to raise their prices very strongly in their next round of offers to the US for August rolling, possibly by as much as $5.00 cwt. ($110 /mt or $110 /nt). Not many official offers have been given yet, however. Some traders still have positions from the last go around priced at $51.50 cwt. to $52.50 cwt. ($1,135 /mt to $1,157 /mt or $1,030 /nt to $1,050 /nt) FOB loaded truck in US Gulf ports; however, with the domestic price increase as well as the large expected increase out of China, traders plan to raise their offering prices by $1.00 cwt. to $2.00 cwt. ($22 /mt to $44 /mt or $20 /nt or $40 /nt) imminently.
Import license data from May 2008 indicate that import wire rod arrivals to the US in May remained relatively low, with the majority coming from Canada. May licenses show 66.745 mt of wire rod imports, compared to census data of 144,739 mt the month before and 193,184 mt in May 2007. In May 2008, the most tons came from Canada, at 32,240 mt, followed by Germany, at 11,198 mt; Japan, at 7,538 mt; Brazil, at 4,669 mt; and China, at 4,043 mt. In April 2008, a good portion of wire rod import tons came from Turkey; however, as Turkey has not been offering competitively for some time, license data show no tons from this country for May.