The summer doldrums finally hit the US wire market, which, out of all the other long products, had experienced the least price volatility and sluggish demand in the past few months.
Shredded scrap pricing declined for the third straight month in July, putting pressure on wire rod producers to finally lower prices. Low carbon rod dropped between $1.00-$1.50 cwt. ($22/mt to $33/mt or $20/nt to $30/nt) in the last month, immediately impacting downstream applications such as mesh and drawn wire. Already suffering from depressed demand from the construction industry, mesh producers now report that spot offers are getting cheaper by the day. Now that mesh customers expect further declines in prices, they are holding off on orders until the market once again shows some stability. Current prices for 10 gauge wire mesh rolls are hovering around $55-$56/roll, with some transactions concluded as low as $54/roll, representing an approximate $1/roll decrease since last month.
Drawn wire is doing relatively better, especially considering that US wire drawers will benefit from a late-June ruling by the US Department of Commerce (DOC) stating that imports of PC strand from China were indeed being dumped in the US. As a result, the DOC slapped countervailing duty (CVD) margins ranging from 9.42 to 45.85 percent and antidumping (AD) margins ranging from 42.97 to 193.55 percent on Chinese PC strand producers. Although this made the US wire market a "level playing field", wire prices are still likely to soften across the board as long as residential and nonresidential construction activity remains tepid.
However, it has been speculated that the weak demand for construction has less to do with a lack of projects on the horizon, and more to do with difficulties getting projects online. H.O. Woltz, CEO of North Carolina-based Insteel Industries, recently remarked in a release, "This weakness is likely to persist until a recovery takes hold in the private sector that includes job growth as well as increased availability of credit for construction financing, particularly for commercial projects." With all the bailout funds showered upon banks in the last year or so, it is unfortunate that financing is a reason that construction is lagging.
While high carbon wire has also experienced a dip in pricing, it has not been as susceptible as low carbon wire to the variations in raw material costs because most high carbon grades are specialty products that do not face much competition, domestically or internationally. Most tire bead-quality wire is currently offered at about $37.00 cwt. to $39.00 cwt. ($815/mt to $860/mt or $740/nt to $780/nt) ex-mill, which is only a slight decrease from pre-July scrap announcement prices.
As for imports, many wire buyers-both high and low carbon-are cautious with overseas purchases, particularly with low carbon wire rod, which has seen a narrowing gap between domestic and import prices lately. Currently, wire rod offers from Turkey are in the range of $28.50 cwt. to $29.50 cwt. ($628/mt to $650/mt or $570/nt to $590/nt) duty paid, FOB loaded truck in US Gulf ports, while domestic prices are just $2.00 cwt. ($44/mt or $40/nt) more. In contrast, last month's gap was $3.50 cwt. ($77/mt or $70/nt). Nevertheless, many wire rod buyers are still importing about 30 percent of their product to be drawn or welded into mesh.