US wire rod market – Domestic prices bottoming out

Domestic wire rod offering prices have decreased by approximately $0.50 cwt. ($11 /mt or $10 /nt) in the past week, however, the pricing trend has changed from down to neutral. Most wire rod offers from domestic mills now range from $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt or $490 /nt to $510 /nt) for low carbon, and from $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) for high carbon. After the $10 /nt decrease from last week, observers predict that prices will stay stable for at least the next couple of weeks. US mesh producers have started buying more domestic mesh-grade rods because domestic prices are now low enough to compete with import prices, especially in places that Chinese imports are hard to reach, like the East Coast and Midwest. This increase in sales activity for low-carbon/mesh domestic rods has helped to fill domestic mills' order books some, and therefore, the pricing trend turned to neutral. While mesh quality import rods are less competitive than they once were, Chinese mills are producing increasingly better quality rods -- Some mills have now mastered low carbon drawing quality grades, and a growing number of Chinese mills successfully export high carbon rods, such as 1065, 1070 spring quality and 1080 PC strand quality wire rods. Tire bead and tire cord grades are generally next in line for the wide spectrum of competitively priced Chinese rod imports. This is a big change from even one year ago, when Chinese suppliers were not offering these grades. On balance, US rod buyers say that December was slightly better than November in terms of sales and consumption. The relatively mild winter weather in the Northeast has allowed some building projects to continue in December. Wire rod demand has even picked up slightly, and many people have renewed belief that the economy will improve in 2007 as key economic indicators are pointing in that direction. As for the import wire rod market, prices have not changed in the past week, and the pricing trend is still neutral. The Chinese VAT issue has not affected the market yet in any noticeable way, though Chinese prices are expected to rise in the beginning of January. Import mesh grade wire rod offers still range from $22.75 cwt. to $23.75 cwt. ($502 /mt to $524 /mt or $455 /nt to $475 /nt) FOB, loaded-truck, in US Gulf ports. Drawing quality still ranges from $24.50 cwt. to $25.50 cwt. ($540 /mt to $562 /mt or $490 /nt to $510 /nt) FOB, loaded-truck, in US Gulf ports from most sources. Some Chinese drawing quality might run $0.50 cwt. ($11 /mt or $10 /nt) below this range. Other news in the import market is that Arcelor-Mittal has acquired the Sicartsa wire rod and rebar mill in Mexico, gaining more of a stronghold in the North American wire rod market. This move is unlikely to have any major effect on pricing, but we can expect to see more acquisitions from this newly formed mega alliance. For the largest wire rod producer in the North America, Gerdau Ameristeel's recent contract reached with the union at its Perth Amboy, New Jersey wire rod mill will help prevent any major labor issues that could cause production outages.