The pricing trend for US domestic wire rod is still strongly up, as Mittal has announced another substantial price increase to take place as of May 1 in order to recoup the rest of the scrap price increases that have occurred since the beginning of the year.
Tuesday afternoon, Mittal Steel informed its customers that prices from its US wire rod mill in Georgetown will increase $55 /nt ($61 /mt or $2.75 cwt.) as of May 1. This brings the mill's total price increases this year to $125 /nt ($138 /mt or $6.25 cwt.) which, according to Mittal, is the amount that scrap prices have increased since the beginning of the year. Mittal had previously hiked its prices $30 /nt ($33 /mt or $1.50 cwt.) as of March 1, and up $40 /nt ($44 /mt or $2.00 cwt.) on April 1. Other mills are likely to follow suit in order to recoup the rest of their scrap expenses as well.
It remains to be seen how Keystone will react to this announcement. By instituting a scrap surcharge, their effective price increase as of April 1 was $70.00/nt ($77 /mt or $3.50 cwt). Some market insiders thought that this price increase lacked some credibility because Keystone did not institute any price increases for their wire products. The wire market is not as strong as the recent flurry of price hikes might suggest. Therefore, it may be difficult for mills to get all of the May and even April increases. Still, most believe that prices have at least a little more room to rise.
On the whole, domestic wire rod prices have increased approximately $1.00 cwt. ($22 /mt or $20 /nt) since the previous week. Most offers for low carbon rod now range from $29.00 cwt. to $30.00 cwt. ($640 /mt to $661 /mt or $580 /nt to $600 /nt) FOB mill, while prices for high carbon range from $31.50 cwt. to $32.50 cwt. ($694 /mt to $717 /mt or $630 /nt to $650 /nt) FOB mill. This range does not reflect Keystone's entire $70 /nt increase.
It is important to note that scrap prices are expected to remain stable or possibly go down slightly this month, which may mark the end of the cost-driven price increases for wire rod. But for now, the pricing trend is still up, as the current offers on the market do not yet reflect all of the scrap price increases that have taken place since the beginning of the year.
The pricing trend for import wire rod remains strongly up, with most mesh grade offers on the market now ranging from $27.00 cwt. to $28.00 cwt ($595 /mt to $617 /mt or $540 /nt to $560 /nt)., an increase of $0.25 cwt. ($5.50 /mt or $5 /nt) from the previous week. Drawing quality offers range from $28.75 cwt. to $29.75 cwt. ($634 /mt to $656 /mt or $575 /nt to $595 /nt), also registering an increase of $0.25 cwt. from the previous week. These prices do not reflect any possible changes to the Chinese VAT rebate.
Import prices are expected to increase further since it now looks likely that the Chinese government will eliminate the export VAT rebate for wire rod as of April 15. There has been no official announcement yet, but it is expected any day now. It looks as if Chinese wire rod mills are reluctant to offer before April 15.
Aside from the VAT issue, the Chinese wire rod market has been fairly stable, though Chinese domestic prices have recently come down slightly. However, the pricing trend is still generally strong, and the slight dip in pricing is not enough to indicate a downward trend.
Year-to-date steel import data from the US Import Administration shows that wire rod imports to the US in 2007 are far below what they were during the same period of the previous year. The data show that from January 2007 through March 2007, the US imported a total of approximately 388,800 tons of wire rod, compared to 831,200 mt of wire rod imported during the same period of 2006.