WR finally sees positive movement in Mediterranean

After having passed through a bad period beginning from the third quarter of 2006, the wire rod market in the Mediterranean started to show slight positive movements coming towards the end of the first quarter of 2007. Wire rod was sold at a price $50/mt higher than rebar in 2004, whereas it remained a minimum $20/mt lower than rebar in 2006 due to the sales of Chinese producers to almost every zone from northern Europe to the Americas. Even in the third and fourth quarter of 2006 and in early 2007, Turkish mills in particular preferred to sell billets rather than wire rods, as it was more profitable. Moreover, some mills that were able to switch production from rebar to wire rod chose to supply rebar to the domestic market instead of WR. In recent weeks, wire rod prices registered a notable increase. Especially the cancellations and delays experienced as regards some of the Chinese cargoes sold to Europe provided an opportunity for Turkish and Egyptian mills. This week, the mesh quality wire rod offers of the Turkish mills were at $565-570/mt FOB. Bookings have also been heard at $560/mt FOB level. Offers from Egyptian mills were at $570/mt FOB. Meanwhile, the European domestic market was also active. Although the prices have not changed in Italy this week, due to the increases of last week the prices of the northern Italian mills were still strong at €450-460/mt delivered to customer. In Spain, the mills had last week abstained from large-tonnage sales as they were expecting an increase in wire rod prices. Indeed, wire rod prices increased in the domestic market this week just as they had predicted. In Ukraine, mesh quality wire rod prices have been heard above the level of $500/mt FOB Black Sea. In March, Mittal Steel Kriviy Rih is expected to announce a significant increase. The current briskness in the Russian domestic market supports this expectation. Increases in wire rod prices seem inevitable given the increases in scrap and rebar. However, the question on the minds of most market players is whether mesh wire rod prices will surpass rebar prices in the Mediterranean as happened in 2004. Such a possibility always exists, but it seems quite difficult without the cancellation of the tax rebate for exports from China.