US wire rod market still digesting domestic price hikes

US wire rod spot prices are firming up in conjunction with scrap-based price increases from US mills. However, customers are still digesting the price hikes, as the demand picture has yet to register any significant improvement.

Following the $60 /nt rise in benchmark US shredded scrap prices last week, several US producers, including Gerdau Ameristeel and Keystone Steel and Wire, have announced that they will increase wire rod prices by $40/nt to $60/nt ($44 /mt to $60 /mt or $2.00 cwt. to $3.00 cwt.) as of August 1. Nevertheless, customers are not rushing to book orders at the new prices, and the hikes seem to be strictly cost-driven.

US rod buyers report that while mills are taking a firmer stance on prices, the market remains somewhat negotiable due to the ongoing weak demand, and spot prices do not yet reflect the full amount of the announced price increases. The offering range for domestic low carbon rod has moved up since last week, though only by about $10/nt ($11 /mt or $0.50 cwt.). Most low carbon rod offers from domestic mills now range from approximately $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) ex-mill. However, the mills are not yet getting much traction at the new price level.

Still, even though US wire rod demand remains mostly lackluster, sales activity has improved slightly in recent weeks, and this in combination with the tight supplies is creating a slightly upward price trend. Imports remain absent from the market and with two major US rod mills recently coming offline, other mills are getting a slight boost in business. While it is shuttering its Perth Amboy, New Jersey wire rod mill, Gerdau Ameristeel is reportedly ramping up production at its Beaumont, Texas plant, which produces wire rod and coiled rebar. Mill officials expect to have the Beaumont facility running at about 55,000 tons/month again by the end of September, which is close to full capacity.

On the import side, Turkish mills have raised their rod prices for the US once again based on higher scrap prices, but there are still no takers. Low carbon offers from Turkey now calculate to approximately $25.00 cwt. to $26.00 cwt. ($551 /mt to $573 /mt or $500 /nt to $520 /nt) duty-paid, FOB loaded truck in US Gulf ports; however, this price level is not expected to gain traction as it is not competitive with domestic prices, and there were not even any bookings from Turkey at their previous price level, which was $1.00 cwt. ($22 /mt or $20 /nt) lower.

Traders also note that with Turkish rod imports remaining uncompetitive, Chinese offers to the US may start to look more attractive again in comparison. Chinese wire rod import have remained largely absent from the US market this year, with year-to-date tonnage totaling only 7,425 mt through June, which compares to the 26,966 mt of wire rod imported from China during the same period of 2008.