US wire market recovery still lagging behind wire rod

The US wire rod market may have bottomed out, but US producers of wire products still are facing an extremely challenging business environment.

The US wire rod market appears to have hit bottom at the end of Q2, with prices traveling on a slight incline since mid-June. The markets for downstream products produced from wire rod, such as bright basic wire and wire mesh for concrete reinforcement seem to have similarly bottomed out, and most of producers of these products have worked through their high-priced 2008 rod inventories; however, US wire products producers say that with demand remaining weak and competition being fierce, they are having a hard time raising their prices to where they need to be based on their rising raw material costs.

Makers of wire mesh, used for concrete reinforcement, in the south and southeast US markets say that they have recently tried to raise prices for 10 gauge rolls to $55/roll based on the recent rise in wire rod prices, but that the market has not accepted this level and continues to hover around $50 to $52/roll.

One Houston-based wire mesh producer told SteelOrbis, “There is too much inventory on the ground for prices to go anywhere and there is no firm price in the market. Basically if you have someone needing a truck-load of wire mesh, they call many people for pricing -- distributors, wholesalers and mills. Then it begins like an auction, and the low man wins.”

Granted, some US mesh producers are seeing better conditions than others, depending on the number of producers in their region and how quickly they have been able to work through their high-priced rod inventory. But for certain producers, such as the abovementioned one, conditions couldn't get much worse.

US producers of drawn wire are said to be seeing slightly better business conditions than firms that primarily serve the construction industries (like mesh), as wire consumption is improving along with US automotive production. Still, overall US wire demand remains severely down compared to recent years, and furthermore, wire drawers and downstream wire product manufacturers are still concerned about imports finished products containing wire from China.

The US Department of Commerce'(DOC)'s antidumping and countervailing duty cases against Chinese imports of several downstream wire products, including steel grating, PC strand and wire decking, are still ongoing (the US International Trade Commission voted unanimously to proceed with these cases in mid-July and preliminary duty determinations in these cases will be announced in October/November), and US wire product manufacturers have already had success in their cases against wire nails, wire mattress spring units,  wire hangers and threaded rod from China, with the US imposing duties over the past two years on Chinese exporters/producers of these products, often exceeding 100 percent, and effectively preventing China from directly exporting these products to the US market in large quantities.

However, imports of finished products containing wire remain problematic for many US wire product producers because many companies are still being impacted negatively by imports of these products despite China's absence. US producers of PC strand such as Insteel Industries report that despite the ongoing trade case, they continue to be impacted by the high volume of Chinese imports that entered the country in the second half of 2008. Furthermore, some producers say that the antidumping orders against Chinese wire product producers are in some cases being circumvented, by transshipping the products and changing the tags and certificates of origin. This undercuts the effectiveness of the duties in place as the imports are still entering the country, albeit illegally.

For example, the latest US DOC data show that while steel wire garment hanger imports from China have dropped to 50,841 thousand units in June 2009 from 204,723 mt in June 2008, wire hanger imports from Taiwan and Vietnam have surged from less than 3,000 thousand-units combined in June 2008, to over 70,000 thousand-units in June 2009. Therefore, overall wire hanger imports only dropped modestly, from 246,994 mt in June 2008, to 169,816 mt. It remains to be seen whether illegal circumvention is taking place in this case or whether producers in these countries are just stepping up to fill the void that China left behind. But either way, US producers of this wire product are still being impacted by imports.

All in all, although US wire and wire product manufacturers have regained some of the US market share in the past two years, and most have survived the worst of the recession, low demand and, to some degree, imports, are still creating very difficult market conditions for many wire companies. However, there is a decent amount of optimism in the industry that the bottoming out of the wire rod market and of the economy will help ensure at least a slow return to profit by the end of the year.