Both US domestic and import wire rod prices have remained stable in the last week, and competitively priced Chinese import offers have all but disappeared.
Has the market finally reached its bottom? Since demand remains weak, it isn't a sure thing that prices have definitively bottomed out; however, for now, the pricing trend for both domestic and import rod offers in the US is neutral.
US shredded scrap prices crept upward in December, although domestic wire rod mills did not upwardly adjust their prices as a result. Sales activity is still too slow for the mills to get away with a price increase, but the scrap hike has allowed them to, more or less, hold the line on their offering prices, and the price decreases we had been seeing every week seem to have stopped, or at least slowed down.
However, while raw material costs have increased, there aren't too many signs of a demand turnaround just yet, as business remains especially slow in the downstream wire markets. Some wire drawers even report that they are selling their rod inventories, which paints a pretty abysmal picture of the current demand situation.
Most domestic low carbon offers have trended sideways from last week at a range of approximately $32.00 cwt. to $33.00 cwt. ($705 /mt to $728 /mt or $640 /nt to $660 /nt) FOB mill. Some buyers point out, though, that they can still achieve slightly lower prices if they have a big order. As one buyer put it, "Everything is still somewhat negotiable."
There are no US rod mills currently producing at full capacity, and many mills are shutdown for the year already. The fourth quarter is typically a slow time for the industry, and mills usually take advantage of it by performing routine maintenance work. While things are much slower this year than usual, mills are hoping that once the market gets over its "fourth quarter blues" and the New Year arrives, business will start to turn up again.
On the import side, after returning to the market this week following a national holiday, Turkish mills' offering prices for the US have remained stable, with most offers ranging from approximately $26.75 cwt. to $27.75 cwt. ($590 /mt to $612 /mt or $535 /nt to $555 /nt) duty-paid, FOB mill, in US Gulf ports. Very few, if any, new offers are being booked, however, given the weak downstream demand and the uncertainty in the market as to whether prices have finally bottomed out yet. Malaysian mills are also heard to be trying to get back into the market, though they are not getting many bites.
Meanwhile, Chinese offers are no longer offering at the competitive Turkish numbers, as the Chinese domestic rod market has improved some in recent weeks. China's economic stimulus package is in place, and its steel market is benefiting. While it is only showing mild improvements thus far, Chinese mills are importing billets again to feed its increased longs production, which is a positive sign. Needless to say, there is no interest from the US in China's higher priced rods, but the absence of low-priced Chinese imports will help tighten US rod inventories.
Import License Data from the US DOC also show a significant drop in wire rod imports from China last month. The data show only 3,199 mt of wire rod imported from China in November, compared to 53,299 mt in October. Total import wire rod tons in November indicated by the License Data are 86,284 mt, down from 106,175 mt in October. However, while imports from most regions were down, Turkish rod imports took a big jump, from 0 mt in October to 20,377 mt in November. Other larger rod import sources in November included: Canada (19,802 mt), Brazil (9,767 mt), Japan (6,851 mt), and Germany (3,669 mt). Still, the overall trend for import rod arrivals remains down, despite the weak foreign markets.