Despite attempts by Turkish mills to raise the import price of wire rod in the last couple days, offers in the US on average have dropped again, widening the gap between domestic and import prices and allowing some import deals to be concluded.
Offers for wire rod from Turkey have decreased in small steps weekly for about a month, and this week was no exception. Offers have dropped by another $0.50 cwt. ($11/mt or $10/nt), even though Turkish mills tried try to put a stop to the eroding export prices. New offer levels are now in the range of $29.50 cwt. to $30.50 cwt. ($650/mt to $672/mt or $590/nt to $610/nt) duty paid, FOB loaded truck in US Gulf ports. With domestic prices staying firm and imports slowly retreating, some buyers have stepped up and bought imports, however, the order tonnages are small compared to the boom years of 2007 and 2008.
China is not really a viable supply source among the US rod imports at the moment. Chinese asking prices are higher than Turkish and there is some talk of the Chinese government possibly discontinuing the VAT rebate program for wire rods. If discontinued, the cost of the imports from China will rise further and make the offer even less competitive compared to Turkish offers.
On the domestic side, wire rod pricing has continued to hold steady, but the increasing gap between domestics and imports, about $2.00 cwt. ($44/mt or $40/nt), are putting more pressure on the domestic prices. Although the rod makers claim to be busy and booked through the summer, some of them may be compelled to discount for sizable orders. On the raw materials front, if the price of shredded scrap dips slightly as expected (by around $10-$15/long ton), domestic mills will feel even more pressure to adjust their prices. Until then, offers remain in the range of $32.00 cwt. to $33.00 cwt. ($705/mt to $728/mt or $640/nt to $660/nt) ex-Midwest mill for low carbon rods.
Although the recovery for wire rod demand is growing slowly along with other long products, the automotive sector is doing the most to bring demand levels back to normal. According to the United Auto Workers union, Detroit-based automakers such as GM and Chrysler plan to hire back workers and expand production in the near-term. Additionally, Ford recently reported a 21.9 percent increase in May sales from year-ago levels and plans to produce 570,000 vehicles in the third quarter-an increase of 80,000 vehicles from the same quarter of 2009. Chrysler's sales also surged last month, with a 33 percent increase from May 2009 levels.