After running their inventories down to bare-bones levels, US wire customers are restocking for better days to come; however, while demand for some wire-related consumer products show improvement, construction projects seem to be just beyond the horizon.
Although roughly $130 billion in stimulus funds have been set aside for infrastructure projects, only 30 percent was allocated in 2009 and 50-60 percent is expected to be spent in 2010. But for now, even though the weather is amenable, construction activity (private as well as public) is slow. Part of the sluggishness in getting money from federal coffers into the hands of construction material (for example wire mesh) companies is the long bureaucratic process of submitting and accepting bids. However, there are many "shovel-ready" projects only awaiting funds, so wire mesh producers will likely see activity relatively soon.
Many in the steel industry are wary of primarily cost-driven price increases, but the imminent influx of construction projects should put them at ease. Even though steel demand has seen better days, wire prices have increased along with leaping and bounding scrap prices; four weeks ago, the pricing for 10 gauge wire mesh rolls ranged between $54-$55/roll, and the price was expected to surpass the $60/roll mark by April. Currently, mesh makers are asking around $62/roll, but there is still room to grow to include the full mill increase. Most customers are now buying at the listed price, but with reservations and not in large quantities.
Another price increase in May is highly expected, and many in the industry think domestic wire mills will bump up the base price for wire rod up to $3.00 cwt. ($66/mt or $60/nt). Because the purchase prices for wire mesh are currently hovering between the April price increase and the one before, the May increase announcement will likely result in wire mesh companies getting at least the full April price, if not more.
Usually big buyers of imported wire rod, US wire mesh producers are not excited about the new import offers at the moment, mostly because import prices surpass domestic offerings. Turkish wire rod was reported this week at $33.00 cwt. to $34.00 cwt. ($728/mt to $750/mt or $660/nt to $680/nt) duty paid, FOB loaded truck in US Gulf ports and trending strongly up, which is far above domestic mill prices of $32.00 to $33.00 cwt. ($705/mt to $728/mt or $640/nt to $660/nt) ex-Midwest mill.
The expected raw material-based price hikes for wire rod will also affect drawn wire prices, but demand for end-use applications such as appliances has been experiencing a mildly robust uptick. Around two-thirds of wire demand relating to appliances is for replacement parts, while the other third is for new units, which makes sense in a recession. But now that the economy is apparently on the road to recovery, there is already evidence that consumers are interested in buying new appliances instead of hanging on to their old, outdated models. As shown on the chart below, retail sales for electronic and appliance stores have been on an upswing for the whole of 2010, showing hints of positive momentum for the wire market.
