US
wire rod mills, who have seen market prices for their product drop by over 50 percent since peaking last summer, have some compelling reasons to try to raise prices again. Strong demand, however, is not one of them.
Domestic rod mills, along with other US
longs producers, have been toying with the idea of raising their prices as of June 1, along with the increase in their raw material costs. With customer inventories starting to thin out, and still no new imports to speak of entering the country, the market might just be ready for an increase. The rise in US shredded
scrap prices since last month may give mills the extra impetus they need to boost prices.
The
scrap surcharge for long products like
rebar and
merchant bar will rise by $43/nt ($47/mt or $2.15 cwt.) this month, some of which mills may pass along to their customers by playing with their base prices. And while
wire rod mills don't generally employ the same method of calculating prices, the same general principle of raising prices in step with raw material costs, when demand allows it, also applies for
wire rod.
Then again, US long products,
wire rod in particular, are still suffering from weak demand. Despite the tight supplies and rising raw material prices, there is a strong chance that customers would balk at any kind of an increase right now.
Another factor which may prevent a domestic price increase is that
wire rod transactions currently taking place within the US are mostly inventory sales, which are conducted at below the market prices for new orders offered by domestic mills. US
wire drawers' recent purchases are mostly being made from the inventories of other
wire companies or from traders' inventories. Nevertheless, despite the bottom-of-the-barrel prices at which these transactions are conducted, inventories are slowly being liquidated, and traders report they are running out of certain sizes. “
Wire companies may not be there yet, but many of them are very close to having to place orders with a domestic mill again,” one trader told SteelOrbis this week.
For now, most buyers, indeed, aren't quite ready to replenish inventories yet in a major way, and domestic low carbon
wire rod offers are still trending sideways, with most offers still ranging from $24.00 cwt. to $25.00 cwt. ($529 /mt to $551 /mt or $480 /nt to $500 /nt) ex-mill. Going forward, although mills may try to raise their numbers based on the higher
scrap prices and dwindling inventories, demand, or lack thereof, will continue to dictate pricing until the inventory de-stocking cycle is truly complete.
Imported
wire rods have quieted down as well since Egyptian
rebar purchases from
Turkey seemingly have taken a breather and no orders from other regions are taking their place. Despite higher
scrap prices, Turkish mills could be forced to lower their prices soon unless they start to get some orders soon. This would, in essence, dash any remaining hope that
Middle East demand is in the midst of even a modest recovery.
For now, while most import mesh quality offers from
Turkey for the US still calculate to the same range as they did last week, 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, as there have yet to be any takers, it is expected that these numbers will come down slightly over the next week or so. On the bright side, the lower priced Latin American offers seen in April are now, by and large, out of the market, so, for now, the Turkish numbers represent the most competitive offers out there.