US wire rod demand remains weak as inventory draw-down continues

While the US wire rod market has seen some positive indications this month in the form of rising scrap and import rod prices, strong demand remains the missing component that is preventing US rod sales and prices from improving.

Most low-carbon domestic rod offers continue to range from about $24.00 cwt. to $25.00 cwt. ($529 /mt to $551 /mt or $480 /nt to $500 /nt) ex-mill – the same range as last week. However, if buyers can generate some decent size inquiries, all sellers are willing to negotiate below their offer levels.  Offers at the low end or slightly under this range are typically for orders of at least 1,000 nt.

On the import side, competitive mesh-quality offers are still found at a range of $21.50 cwt. to $22.50 cwt. ($474 /mt to $496 /mt or $430 /nt to $450 /nt) in the Gulf. However, these competitive South American offers have no proven track record and their shipment performance could be less than perfect. Meanwhile, Turkish mills have yet to back down from their offering range of $23.50 cwt. to $24.50 cwt. ($518 /mt to $540 /mt or $470 /nt to $490 /nt) duty-paid, FOB loaded truck in US Gulf ports. Nevertheless, demand for wire rod in the US remains weak and there are still no bookings at the new Turkish price levels.

Traders report, though, that while they are still getting few, if any, bookings, the increase of Turkish prices and rise in scrap prices this month has caused a slight up-tick in interest and speculation that the market is close to bottoming out. And while there is still next to no demand for new production, US wire drawers are still using their rod inventories and even purchasing rod from other wire companies.

Business for the US wire and wire rod markets in April, while significantly down compared to last year, is at least slightly better than it was last month. Given the lack of import arrivals and severely reduced domestic output, some think that once the overhang of rod inventory is depleted, the market will tighten up quickly. Domestic mills will most likely be reluctant to raise capacity quickly because any pick up in orders may be temporary. Although demand will likely remain at reduced levels until the automotive and housing sectors start to pick up, the de-stocking phase of the inventory cycle may be drawing to a close, upon which the free-fall of US rod prices should also come to an end.

The latest steel import license information from the US Department of Commerce show that US carbon wire rod imports in April, based on data compiled through April 21, have, thus far, remained at relatively low levels, with April shaping up to be the seventh consecutive month that wire rod imports to the US have declined. Total wire rod import licenses through April 21 amount to 12,592 mt, with the largest amounts coming from Canada (6,564 mt), Japan (1,955 mt), China (1,285 mt) and Germany (1,119 mt).