The US wire and wire mesh markets have continued to tighten up in the last month as wire drawers pass along their raw material cost increases to customers.
Most major wire drawers and mesh makers have successfully raised their prices to reflect all of the wire rod price increases to date this year, which are pretty hefty, totaling roughly $150 /nt ($165 /mt or $7.50 cwt.) through March, not including the large price increases seen in the third quarter of 2007 or the significant price increases expected for April 2008.
In April, wire drawers on the East Coast have already announced that they will increase prices $4.50 cwt. ($99 /mt or $90 /nt). Some major mills like Leggett and Platt have not yet announced April prices for basic wire yet. West Coast wire drawers have not yet announced April prices either, but they are expecting to go up by $3.00 cwt. to $5.00 cwt. ($66 /mt to $110 /mt or $60 /nt to $100 /nt).
Offshore rod prices have also escalated significantly this year and, in general, due to the rising prices worldwide and China's diminished presence in the market, offers are sparse and are priced much higher than domestic rods. Very little wire rod tonnage has arrived to the US this year -- Preliminary census data from the US Import Administration show that in January 2008, 87,139 mt of wire rod was imported, compared to 186,127 mt in January 2007. Of this tonnage, only 14,666 mt was from China, a major decrease from January 2007's 114,929 mt.
So, in addition to the rising rod prices, wire drawers are now facing a rod shortage due to the lack of imports. Domestic mills are getting busier, with rolling schedules getting further and further apart. Even though there is un-utilized capacity, rod producers are reluctant to add another shift to increase production. This is creating some resentment among the wire drawers. Some think that domestic mills are trying keep prices artificially high, taking advantage of the lack of imports at the expense of the wire industry.
There is a lot of anxiety about this situation in the market since wire and mesh producers are worried that they may not be able to meet their rod needs either from domestic or import sources. For these reasons, the pricing trends for both wire and mesh in the US remain strongly up.
From an end-use standpoint, demand for wire and mesh is still very slow due to the sluggish economy and, in particular, the disastrous state of the housing market, which is not expected to improve any time soon. A word that many are using to describe some of the steel markets including wire is "stagflation," as demand isn't growing, but prices are. All in all, despite the rising prices, the US wire market may have a rough time ahead of it.
Imports of bargain-priced Chinese rod and wire are no longer a big issue, as prices have risen significantly due to the elimination of Chinese mills' VAT rebate and the export tax now in place. The few available Chinese offers for both rod and wire are now, in most cases, at a high premium to domestic prices. However, this does not mean that China is no longer causing any problems in the US market; imports of finished wire products are still arriving at low numbers, which US wire drawers say is doing harm to their business since in many cases it's cheaper for customers to import the finished products than to fabricate them in the US. Items like threaded rod are still being imported from China at low prices, which is why this week Vulcan Threaded Rod Company, the largest threaded rod producer in the US, filed an antidumping petition against Chinese imports of this product.
In its petition to the US DOC and ITC, the company says that the imposition of an antidumping order against Chinese threaded rod will enable US manufacturers to recover from the detrimental impact that these imports have had so far. Vulcan says that Chinese threaded rod now controls two-thirds of the US market due to its continued low prices, damaging US companies' profitability. The ITC is expected to make a preliminary injury determination in this case by mid-April 2008.
On the mesh side of the business, prices also continue to rise, despite the slow demand. Demand for 6-gauge mesh is still stronger than 10-gauge due to the use of 6-gauge in more non-residential projects.
Wire mesh prices have come up significantly in the last month. In the Florida market, the price for a 10-gauge roll of wire mesh is in the high $60's, while in the Texas market, the price for a 10-gauge roll is also in the high $60's, up from the $60 level last month. Mesh producers in both regions announced that as of March 17, the 10-gauge roll price is expected to go up to $72 apiece, and 10-gauge sheet will rise to $18 apiece.