Although May seemed to promise a summer of slowly rising demand, the end-use sectors upon which the domestic wire market depends have not regained strength as fast as many would like. While some of this can be attributed to the seasonal slowdown that occurs across the span of the steel industry each summer, the slow (yet still steady enough to keep businesses running) activity is mostly reflective of a frustratingly sluggish economic recovery.
But a recovery, albeit slow, is better than a recession; while many wire mesh companies bemoan the lack of surging construction projects, there are projects out there-enough to keep businesses from folding as fast as they did in 2008-2009. And other sectors, such as automotive (sales increased in May by 19 percent year-over-year) and manufacturing (new orders for US factories rose 1.2 percent in May from April), are doing well enough to keep the demand for wire well above recession levels.
In fact, some wire companies, such as Leggett & Platt, a Missouri-based manufacturer of steel furniture components, have boasted increased sales and revenue so far this year and do not foresee the slowdown that others in the market predict. However, despite the apparent healthy demand for furniture, Leggett & Platt's success has much to do with the fact that they bought their own steel mill in 2002-better control of their supply chain has helped widen their profit margins. Another way in which many companies are staying afloat is by keeping inventories lean and operating under limited debt. By the time second quarter results are published in the next month or so, it will become clear which companies were well-prepared to weather the economic storm.
The rest of the summer will be hard to predict in the domestic wire market, especially if prices for wire rod come down in the near term. Already, published prices for other long products have dropped, and wire mesh companies, at least, predict that unpublished wire rod prices will follow, even though mills have recently claimed that they will keep prices firm. However, some wire drawers are convinced that mills will not want to share any margins gained from the slight scrap decrease. If they hold on to current prices, wire buyers (both drawn and mesh) might find themselves in the position of having to acquiesce to their own customers-who know scrap prices have dropped-and lower their prices. Bright basic wire producers, however, will likely keep prices level no matter what happens with rod, because their margins are so narrow that it would be tremendously harmful for even one competitor to break off and drop prices. By next week, the wire pricing trend should be apparent. Currently, domestic wire rod prices are $32.00 cwt. to $33.00 cwt. ($705/mt to $728/mt or $640/nt to $660/nt) ex-Midwest mill.
Prices for 10 gauge rolls of wire mesh have already felt the downtrend of the US wire market, with prices now offered in the range of $55-$57/roll, down from $59-$62/roll last month. Inventories are being kept purposely low, which has affected the levels of imports mesh companies are bringing in. Imported wire rod from Turkey (FOB loaded truck in US Gulf ports), for instance, is about $3.50 cwt. ($77/mt or $70/nt) less than domestic pricing, but long lead times and uncertainty in the overseas market, combined with large tonnage requirements for importing, has kept many mesh companies buying only what they need when they need it on a domestic basis.
