Demand for wire and wire mesh in the US is still not good, but with raw material prices continuing to rise, wire drawers have no choice but to pass along their cost increases to customers.
Wire drawers have not been able to push through all of the first quarter wire rod price increases yet, which include a $40 /nt ($44 /mt or $2.00 cwt.) January/February price increase most rod mills announced as well as the $50 /nt ($55 /mt or $2.00 cwt.) February price increase announced by ArcelorMittal Georgetown. Due to the weak market conditions, wire drawers have been delaying the rod price increases until their inventories of lower priced rod run out and they have to purchase more rods at the new prices.
For the most part, only the fourth quarter rod price hikes, which totaled approximately $70 /nt ($77 /mt or $3.50 cwt.), have been passed along to wire customers so far. Wire producers will raise their prices $40 /nt increase for February shipments, though the smaller players say that it is unlikely that customers will accept the increase right away, and that it may not go through until April.
Wire rod prices continue to trend upward, both domestically, due to scrap price hikes and availability issues, and for imports, due to China's export tax and VAT elimination, as well as Turkey's skyrocketing scrap and longs markets. Even wire drawers that are willing to pay the higher domestic prices are having a problem procuring material, since domestic mills are very full and are, in many cases, putting customers on allocation. Import rod offers are also scarce; with China now gone from the market, Turkey and Germany are the only credible import sources, and available offers are limited and are at a high premium to domestic prices.
Import wire is no longer a source of much competition for domestic wire drawers, as Chinese numbers rose dramatically after the VAT rebate cutback went into effect in the second half of 2007. However, fabricated wire products remain a big concern, as these finished products (such as stucco netting and fence products) are largely free from trade restrictions. For this reason, Leggett & Platt Inc. has recently filed an antidumping petition against uncovered innerspring units (for mattresses) from China, South Africa, and Vietnam. The case isn't a slam dunk, however; in the past, L&P brought a Section 421 case against China on the same product, and the US International Trade Commission (ITC) made a unanimous negative determination. For the new case, the ITC will hold a staff conference January 22, and will make its preliminary injury determination on February 13. If the investigation proceeds and an antidumping order is ultimately issued, more of these inner springs will have to be produced more domestically, which may result in an increase in high carbon rod consumption in the US.
Building mesh prices have also increased along with wire and wire rod prices. Mesh makers in Texas have raised their prices for 10-gauge building mesh to $64 to $66 per roll. They say, however, that customers have not accepted the price increase in full yet, and they are still only getting about $60 per roll. Demand for mesh is also very slow, though 6-gauge mesh is seeing slightly better demand than 10-gauge, as 6-gauge is used for commercial building and 10-gauge is used mostly for residential. Mesh makers are expecting the new level of mesh pricing to be achieved in the next few months as rod inventories on the ground have diminished, and the replacement import rod cost is approaching $36.00 cwt. ($794 /mt or $720 /nt).