Steel wire has been one of the hardest-hit products from the US' twin housing and automotive industry collapse, and unfortunately, it doesn't look like this situation will change dramatically for the better anytime soon. However, that is not to say that there aren't any bright spots appearing on the horizon for this embattled industry.
First it was China; now, the collapse of demand altogether. The US wire industry has certainly had a rough few years. While the threat of cheap Chinese imports is still looming, particularly for finished wire products, with the successful trade cases filed on many wire products by US producers, China has definitely taken a big step back from the US import market. US DOC data show that total wire drawn imports have been on a steady decline since June 2008 (from 58,300 mt in June to 27,300 mt in February), and Chinese imports have dwindled to next to nothing (6,340 mt in February).
However, while China is no longer considered a major threat for US wire, a new one has emerged, and its name is "recession." With the amount of wire that goes into housing and automotive related products, it is no surprise that the wire industry has been particularly hard-hit by the prolonged downturns in these industries. Some US wire drawers have not survived the economic storm and have had to shutter their doors; others are barely hanging on. Most are getting by OK, thanks to the record profits the industry saw in the last couple years, and are matching their costs to the current demand by cutting production and staff, hunkering down and waiting for the storm to blow over.
Among the industry's problems since wire prices collapsed are the high raw material costs compared to the declining wire sales. While wire rod prices have come down tremendously in the last few months, many wire drawers are still working from higher priced rods in inventory. While their customers are expecting to see the full decrease of rod reflected in their wire price, and the wire drawers are often obliged to give it to them in order to get their business, the drop in wire production costs has lagged behind the decrease in rod prices. On the bright side, much of the higher priced rod inventory is finally being worked through, so for most drawers, production costs will decrease in the second quarter. The slow depletion of rod inventories is also a good thing for the rod market of course, as it means that they will have to be replenished. Unfortunately, due to the poor economy, this cycle of inventory reduction is taking place a lot slower than usual.
Along with declining input costs, another positive for US wire is the infrastructure-related portion of the recently passed economic stimulus bill. Texas is one of the largest recipients of these funds, and many projects are already getting underway. The Texas Transportation Commission has approved stimulus funds for 266 roadway and bridge maintenance and rehabilitation projects valued at over $500 million. An additional $1.2 billion has also been allocated for 29 construction projects across the state. States across the country have been granting similar bids for their own stimulus-funded transportation projects, with much of these "shovel ready" jobs expected to be in full force by this spring. At the most recent American Wire Producers Association meeting, it was mentioned that an additional three to four million net tons of steel consumption is expected to be generated from the stimulus spending, with long products making up the bulk.
Long products, particularly concrete-reinforcing products like wire mesh, should surely see at least some improvement in demand as a result of the injection of these much-needed stimulus funds. For now, though, most wire products, including mesh, are still having a rough time due to the poor commercial demand. Mesh-makers in Texas say that the going price for 10-gauge rolls is in the mid $60's per roll, which reflects a decrease of about $5 since last month.