Not too much good is going on in the US wire rod market, as the prolonged demand drought may be pressuring more companies to cut shifts, shed jobs and in some cases close their doors for good.
Just a couple of months ago, after the wire rod market experienced the steep decline of an ongoing rollercoaster ride, the majority of traders and wire rod professionals were urging others and convincing themselves to basically "just hang in there" throughout the rest of the year (2008) until demand began to pick up and the rollercoaster started to climb up again. So far, that has not happened, and, in fact, the ride is still sloping downhill. Even though most professionals probably didn't expect to see high price increases and a whirlwind of transactions by now, they most likely also didn't expect to see the high inventory levels and weak demand which have been contributing to further price declines entering the second week of February 2009.
Despite mills' best efforts to hold spot prices firm this week, after declining by about $2.00 cwt. ($44 /mt or $40 /nt) in the last few weeks, prices have continued to come down, declining on average by about another $1.00 cwt. ($22 /mt or $20 /nt) this week in order to sway any orders to close, that may have been teetering on the fence. As a result, most low carbon wire rod offers from domestic mills now range from approximately $29.00 cwt. to $31.00 cwt. ($639 /mt to $683 /mt or $580 /nt to $620 /nt) FOB mill. As has been the case for the past several months, some US mills may take orders slightly under this range for significant tonnage.
The sentiment from many wire producers and professionals is that they are becoming tired of "nothing" going on in the market. They have been waiting patiently for the turnaround, or at least a definite sign of the market leveling out, but activity has continued to remain dormant. "It is as though a Category 5 hurricane came and sat on top of us," a wire company executive told SteelOrbis. There will be an eventual turn around sometime, but some wire companies, and even wire rod producers, may not be able to weather this prolonged storm much longer. Relief doesn't seem to be in the cards at least for another two months.
On the import side, Turkey remains the most competitive country exporting wire rod to the US. Turkish mesh quality rod offers have not officially changed from last week and continue to range from approximately $25.50 cwt. to $26.50 cwt. ($562 /mt to $584 /mt or $510 /nt to $530 /nt) duty-paid FOB loaded truck in US Gulf ports. However, Turkish mills are still aggressive and will most likely be willing to negotiate orders for significant tonnage. Therefore the import pricing trend remains slightly down.
Meanwhile, China's domestic wire rod market is relatively strong and, therefore, Chinese mills are not eager to export wire rod to the US. There aren't very many legitimate offers and Chinese wire rod offers are an estimated $5.00 cwt. ($110 /mt or $100 /nt) higher than most Turkish offers. Consequently, China is not a viable option for traders for the time being.
As a whole, wire rod imports to the US had been holding their own throughout the second half of 2008, averaging an estimated 89,905 mt of monthly import tonnage, according to preliminary census data, compared to a monthly average of 92,035 mt throughout the first half of 2008. However, license data show that worldly wire rod imports to the US are at an estimated 72,995 mt for January 2009, compared to 87,139 mt during the same period last year.