As sluggish construction activity in the US threatens to drag down demand for domestic wire rod, the market is looking to the automotive industry to pick up the slack.
While US domestic wire rod prices have not changed in the last week, sources tell SteelOrbis that they are concerned about wire rod demand's ability to keep prices up. Still approximately $2.00 cwt. ($44/mt or $40/nt) shy of official asking prices, current spot prices are hovering in the range of $37.50-$38.50 cwt. ($827-$849/mt or $750-$770/nt) ex-Midwest mill, with the expectation of a sideways price move in April following the likely neutral scrap trend.
As mentioned in previous reports, the US construction sector expects continued slow growth this year, but activity levels will not likely surge into comfortable post-recovery prosperity. However, the US automotive industry is still forecasted for strong growth in 2011, despite supply setbacks for certain parts in the aftermath of the Japanese earthquake and tsunami. Along with Japanese auto producers, auto parts suppliers in the traumatized nation have been forced to cut production--by a large portion, if not entirely--due to power and resource rationing. US auto producers rely on several Japanese-sourced parts, and shortages will likely affect US production in the coming months (Subaru North America announced a reduced production schedule on Tuesday). Nevertheless, optimism remains in the market. US-based auto industry analyst JD Power and Associates is sticking to its 2011 North American production forecast of 12.9 million units, expecting any lost volume from the supply situation to be made up later in the year.
As the Japanese situation affects the global automotive industry, demand has also been affected in overseas sources of US imported wire rod. As with US wire rod mills, Turkish mills are trying to keep prices up, but sources tell SteelOrbis that in an effort to fill ships, some Turkish mills might try to cut deals on import offers. Sales prices of Turkish wire rod in the US, however, have not declined as result--yet--but there is a strong likelihood that the current price range of $36.75-$37.75 cwt. ($810-$832/mt or $735-$755/nt) duty paid FOB loaded truck in US Gulf ports will drop in the coming weeks.
