US wire rod market – Import pricing has stabilized

The pricing trend for import rebar has changed from slightly down to neutral, as Chinese prices have started to bounce back. In addition, wire rods were included in the reduction of the Chinese VAT rebate program, so the new change in the rebate rate will bring approximately $12 /mt ($0.54 cwt. or $10.88 /nt) cost increase to Chinese exports. VAT rebate went down from 11% to 8% with the effective date September 15, 2006. The general price range for import wire rod has not changed yet, but with the absence of bargain offers from China, we feel that prices will not go down any further. Import mesh grade offers still range from $23.00 cwt. to $24.00 cwt. ($507 /mt to $529 /mt or $460 /nt to $480 /nt) FOB, loaded-truck, in US Gulf ports. Import drawing quality rod prices still range from $25.00 cwt. to $26.00 cwt. ($551 /mt to to $573 /mt or $500 /nt to $520 /nt) FOB, loaded-truck, in US Gulf ports. Prices are approximately $1.00 cwt. ($22 /mt or $20 /nt) more on the West Coast. Census data from the US Steel Import Monitor shows that from January 2006 to July 2006, China has remained by far the largest exporter of wire rod to the US, at 647,665 mt of wire rod exported to the US during that period; followed by Canada, at 184,474 mt; then Turkey, at 157,058 mt; Brazil, at 83,091 mt; and Trinidad and Tobago, at 73,227 mt. In the US market, the big news is that Gerdau Ameristeel's Perth Amboy, New Jersey melt shop is closing. This location is a major wire rod mill, and the rolling mill will still be operating. Billets, however, will have to come from somewhere else. We don't think that this will affect pricing in the short or the long run. Ameristeel has built up some billet inventories with the expectations of a possible strike, so they have plenty to get by. Also, their parent company has plenty of excess billets to export from Brazil. The only possible change is that Ameristeel may start to focus a bit more on higher grades of wire rod, getting out of the mesh quality market. Domestic offers still range from $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) FOB mill for low carbon, and from $30.00 cwt. to $32.00 cwt. ($661 /mt to $705 /mt or $600 /nt to $640 /nt) FOB mill for high carbon. Large buyers continue to negotiate better deals than the above numbers. For now, the pricing trend remains neutral.