US wire rod market – Light at the end of the tunnel?

Domestic wire rod mills have not yet announced price increases, but the market is finally itching to go up. Most observers will agree that domestic wire rod prices have more or less bottomed out, and in all likelihood will soon start to rise again. As of now, there is no big upsurge in business volume, but this is expected to change in the coming weeks as more orders are placed. For now, most wire rod offers from domestic mills still 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. The pricing trend is still neutral for the short run. There are also signs that import wire rod prices are going to rise, as international billet prices are now rallying, particularly in Turkey and China. In some cases, billets are priced the same or even higher than wire rods. Under this unusual circumstance, it is more profitable for a steel producer to focus on billet production and cut capacity in wire rods. It is inevitable that Chinese wire rod prices will soon go up because of the billet situation. Therefore, the pricing trend for import rods is now slightly up. Presently, 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. There are still rumors circulating about the much talked about VAT export rebate reduction on wire rod and other steel products. However, the Chinese government has yet to make an official announcement or set a date for a reduction. If the rebate comes to fruition, it will have a positive effect on pricing for Chinese wire rod exports to the US and elsewhere. As of now, the price difference between Chinese rods and their closest competitors is over $60 /mt, and this imbalance should correct itself in the near future. Preliminary license data from the US Import Steel Monitor show that during the month of December 2006, China remained the top exporter of wire rod to the US with 79,445 mt. Other top import wire rod sources in December were: Canada at 19,227 mt, Argentina at 10,800 mt, Brazil at 10,073 mt, and Trinidad and Tobago at 9,273 mt. Overall, Argentina was not one of the US' main import wire rod sources in 2006; China, Canada, and Turkey were the top three sources for the year.