Steep scrap-based price hikes and overall sluggish demand have left US wire customers apprehensive about restocking already low inventories.
The US wire market, especially producers of construction-related products, usually looks forward to March, when the normal seasonal pickup stimulates the marketplace. This year, however, snow, rain and floods continue to plague the US Midwest and Northeast and the demand for construction-related wire products has remained disappointing. What's more, cost-driven price increases have left many wire buyers scratching their heads, hesitant about refilling their abnormally low inventories, especially with memories of 2008's steep downturn still fresh in the minds of many. Skip forward to 2010, and end-users have since moved to buying only what they need. This could change as raw materials push wire rod and wire prices further up.
After the latest scrap price jump in early March, wire rod mills just announced their corresponding price increases, at approximately $60/nt ($1,323/mt or $1,200/nt) for low carbon grades, effective April 1. Battling weak demand, wire producers will likely resist the increases at first, but a good portion of the price increase will probably be passed. Therefore, wire producers will also aim to pass this increase to their customers equally. It is not going to be easy, especially for building mesh producers. They have been aiming to raise prices in the last several months without much success. At this time 10 gauge wire mesh roll pricing in the Gulf Coast and Southeast US has remained at the levels reported four weeks ago, ranging between $54 to $55/roll. However, almost all mesh producers have sent increase announcements and are aiming to boost roll pricing into the low $60/roll range in April.
Despite the general low demand for wire products, there is one reason for hope. Residential construction is experiencing a slight uptick in activity, and while it's not enough to be considered "stimulating", it can be seen as a possible light at the end of the tunnel. According to the US Department of Commerce, private residential construction spending increased by +1.3 percent in January from December. That percentage might seem small, but as the first gain in three months, it should be viewed with a healthy dose of optimism. Likewise, housing starts are also on a slow rise upward, after nearly three years of continuous decline.
