As a product that relies heavily on the housing and automotive markets, US wire rod is in for a rough ride this year, to say the least.
What was one of the strongest US steel products a year ago is now suffering greatly along with the slumping economy. With its main customers, wire drawers, being acutely impacted by the prolonged downturns in housing and automotive, wire rod's demand prospects for the near future are looking quite dim, perhaps even the dimmest of all the steel products due to the severity of the collapse of its end markets.
And yet, there is some good news for wire and wire rod: infrastructure-related government funds from the American Recovery and Reinvestment Act of 2009, more commonly known as the US stimulus plan, are starting to go into effect, as states have been given the go-ahead to start spending their portion of the $28 billion allocated to highway and bridge repairs. Products made of wire rod, particularly products like wire mesh, will certainly see at least a small up-tick in consumption as a result of this spending.
But for now, the up-tick has yet to arrive, and most industry professionals seem to agree that things will probably still get worse before they get better. Meanwhile, wire rod prices continue to erode. On the domestic side, low carbon prices have, on the whole, deteriorated by about $1.00 cwt. ($22 /mt or $20 /nt)since last week. Most offers now range from about $28.00 cwt. to $29.00 cwt. ($617 /mt to $639 /mt or $560 /nt to $580 /nt) FOB mill. However, buyers still say that there is really no set price and while mills may initially offer a quote at above this level, customers are usually able to negotiate the mill down to a lower price due to the general lack of orders.
On the import side, the situation is no different. While most offers continue to range from about $24.25 cwt. to $25.25 cwt. ($535 /mt to $557 /mt or $485 /nt to $505 /nt) duty-paid FOB loaded truck in US Gulf ports, mills and traders are still struggling to put together orders, and given the absence of demand both in the US and around the world, it is likely that this price will continue to trend down.
Turkey remains the primary source offering import wire rod to the US, while China is still absent from the market. There are very few import shipments currently on the way, but inventories, both on the trader level and on the customer level, remain high, particularly for certain sizes. As one Gulf-area trader explained, the problem is that a lot of positions were taken on sizes that were moving fast several months ago, but due to the sharp drop-off in demand, traders now have overabundance of those sizes, namely 5.5 mm and 6.5 mm, on the ground.
To end on a somewhat positive note, there is a general feeling in the market that prices can't get too much lower and that the bottom is near. By the same token, though, most market players will concede that that we're probably not quite there yet, and it is still unclear just how close (or how far away) we are.