Despite October price hike, US rod producers still facing weak market

Although US wire rod mills are asking for slightly higher prices this month, the industry continues to suffer from anemic demand.

After rising by about $1.00 cwt. ($22/mt or $20/nt) last week, domestic wire rod offers are now trending sideways, and large buyers are still able to command discounts. Buyers say the price up-tick is purely in response to supply, rather than demand factors, and there does not seem to be any momentum at the time being for prices to rise further.

For now, US low carbon wire rod prices remain in a general range of $29.00 cwt. to $30.00 cwt.
($639/mt to $661/mt or $580/nt to $600/nt) FOB mill. However, mills are not getting many orders at this price level, and large players can reportedly get slightly under $29.00 cwt.  And with both US scrap and import wire rod prices pointing in a slightly downward direction, there is some speculation that domestic rod prices could even weaken somewhat in the coming weeks, as prospective buyers use cheaper import offers in order to bargain with domestic mills.

On the side of imports, mesh-grade Turkish material is still offered at an approximate range of $27.00 cwt. to $28.00 cwt. ($595/mt to $617/mt or $540/nt to $560/nt) FOB loaded truck in US Gulf ports. However, offers are expected to weaken soon as Turkish mills have become increasingly open to negotiation as they have yet to see any pick-up in demand from their main export markets post-Ramadan.

Meanwhile, Chinese (boron-added) wire rod offers are still slightly above the Turkish price range, though they have continued to weaken since last week. Traders expect that by next week, upon China's return from its week-long National Holiday, Chinese offers may have approached a feasible level for US buyers that is comparable to or only slightly above Turkish offers. For these reasons, the import price trend for wire rod has shifted from neutral to slightly down.

The sole bright spot in the US wire rod market remains the tight supply controls. With two major US producers exiting the market in recent months and the continued lack of import presence, supply constraints are such that US producers have been able to stop the falling price trend which characterized the first half of the year. However, even with said constraints, US wire rod mills continue to operate at reduced capacity and still struggle to fill their order books. Therefore, if import volumes start to rise again, the domestic market may lose some of its new-found stability.

US import license data for September show that wire rod import volumes during the month remained steady as compared to the previous month, with import licenses in September totaling 62,482 mt in September, compared to the August preliminary census total of 63,534 mt. Canada remained the largest import source in September, with 27,908 mt, followed by Italy (8,665 mt) and Brazil (8,408 mt).