As most North American mills prepare to resume production, there is still a lot of uncertainty as to what early 2009 will hold for the US rod market.
Most rod buyers in the US returned from their holiday vacations this week, but there is still very little sales activity taking place. It is common for the market to be quiet this time of year, but the recession and credit crisis sure aren't helping things. The rod mills are optimistic, however, that the first part of the year will see some kind of recovery as buyers return to the market.
The fact that mills like ArcelorMittal Georgetown are getting ready to start producing again - production at the mill will officially resume next week - shows that producers are confident that buyers will, indeed, come back to the market sooner rather than later. On the other hand, given the current economic conditions, a major rebound is not in the cards for the first quarter.
US producers seem determined, though, to put a stop to the drop in rod prices which started in the second half of '08. Domestic rod buyers say that mills are offering low carbon rods at a range of $32.00 cwt. to $33.00 cwt. ($705 /mt to $728 /mt or $640 /nt to $660 /nt) FOB mill for January rolling. Officially, domestic rod offers have not moved in recent weeks. However, it had been observed for some time that the mills were willing to negotiate a lower price for large orders. In some cases, they need large orders to accumulate enough tonnage to roll certain sizes. Whether or not they will be successful at stabilizing prices and eliminating bargain deals depends on how many orders they get. As of now, since the mills are not yet full for January rolling, it is not yet clear whether their firm stance on prices will be a successful venture.
One factor that the domestic rod mills have in their favor is the higher-priced spot offers for import rod on the ground. Another might be the expected increase in US scrap prices, which will likely take place this week. The increase probably won't be large enough to warrant a price increase for most, if any, long products, but even a slight increase should be beneficial in convincing buyers that the pricing trend has finally bottomed out.
New import offers, however, remain below the official domestic price levels. Most new mesh-quality rod offers from Turkey continue to range from approximately $26.75 cwt. to $27.75 cwt. ($590 /mt to $612 /mt or $535 /nt to $555 /nt) duty-paid, FOB loaded truck in US Gulf ports. Most traders suspect that while the bottom of the market is very close, there is a possibility that import rod prices will fall a little bit further before starting to rise again. Then again, Turkish scrap prices are trending slightly upward, and the mills have started to reflect the higher raw material costs in their export longs offers. For now, however, very few import rod transactions are taking place, as neither US buyers nor foreign mills have returned to the market in a major way.