While some wire drawers and mesh companies saw a quick burst of activity ahead of the recent price increases, the overall fourth quarter forecast is bleak.
Even though recent construction industry data appears to point to slight improvement in the sector (both construction starts and permits were up in August), wire mesh companies continue to suffer from sluggish sales and rising raw material costs. Before domestic low carbon wire rod pricing increased again this month, some mesh buyers hurried to buy before the imminent price hike was announced, but since then, there has been little to no activity. Currently, many wire mesh companies are able to get wire rod from mills at around $32.00 cwt. ($705/mt or $640/nt) ex-mill, which is around the middle of the pre-increase range. As previously reported, domestic wire rod mills are not exactly expecting to get the full $1.50 cwt. ($33/mt or $30/nt) price increase, and will likely be flexible with large-tonnage mesh companies throughout October, especially if shredded scrap prices drop as expected. Currently, 10 gauge wire mesh rolls are being offered for $55-$57/roll, with most companies trying to push for the higher end of the range. This represents an increase of about $2.00/roll since last month. Higher prices without higher demand always make people nervous, leading many mesh producers to predict a grim fourth quarter.
As for drawn wire, traditionally thin profit margins for bright basic wire have narrowed even further with the rising costs of raw materials. According to some in the industry, wire producers are selectively trying to bump up manufacturing products in order to absorb less of scrap hike, with varying success depending on the end-use sector. For example, the appliance and agricultural equipment sectors are doing well and are likely more amenable to paying higher prices.
Despite the fluctuations in low carbon wire rod pricing, high carbon wire has remained relatively neutral. Prices for tire bead-quality high carbon rod is still in the range of $38.00-$40.00 cwt. ($838-$882/mt or $760-$800/nt) ex-mill, reflecting the general stability in the automotive sector-IHS Automotive, a leading automotive research firm, forecasts a 3 percent increase in North American auto production in the fourth quarter, following a 25 percent rise in Q3 and 74 percent increase in Q2.
The common thread between all segments of the US wire market is their increasing reliance on domestic wire rod over imports. Traditionally, wire drawers and mesh companies purchase 70 percent domestic and 30 percent imports. In the last couple months, however, no one has inquired much about imported wire rod, mostly because prices are not attractive enough and there isn't much impetus to bring product in during the fourth quarter. As illustrated in the chart below, wire rod imports are already dropping off, a trend that is likely to continue into Q4. Currently, import prices from Turkey are in the range of $30.00-$31.00 cwt. ($661-$683/mt or $600-$620/nt) duty paid FOB loaded truck in US Gulf ports, with the majority of offers in the higher end of the range.
