The US wire rod market continues to languish from lack of business, and domestic mills are having a hard time filling their order books.
Mills have tried to hold the line at $32.00 cwt. ($705 /mt or $640 /nt) up until a few weeks ago but had to take prices down another $2.00 cwt. ($44 /mt or $40 /nt) or so to pull in the few orders to be had. As a result, most low carbon wire rod offers from domestic mills now range from approximately $30.00 cwt. to $31.00 cwt. ($661 /mt to $683 /mt or $600 /nt to $620 /nt) FOB mill. Moreover, due to the overall lack of demand, some US mills have taken orders at slightly under this range for large tonnage.
Despite the expectation in January that the market had bottomed out, the overall pricing trend for US domestic wire rod is currently slightly down. Until demand picks up, quiet deals at below the mills' advertised prices are expected to continue, putting downward pressure on the market. Additionally, after a slight up-tick in January, US shredded scrap prices are expected to register a moderate decrease in February, which will put further downward pressure on US longs prices.
On the import front, market conditions aren't looking very hopeful either. Because of the lack of business, some traders have cut their prices, with most import offers for Turkish mesh quality rod now ranging from approximately $25.50 cwt. to $26.50 cwt. ($562 /mt to $584 /mt or $510 /nt to $530 /nt) duty-paid FOB loaded truck in US Gulf ports. Turkish mills are reportedly still hungry for orders, and there are probably some milder price decreases to come.
Turkey is still the main competitive source offering wire rod to the US at present. However, wire rod import tonnage from Turkey has been higher than usual in recent months - Preliminary census data show Turkish wire rod imports to the US totaled 35,221 mt in December, and license data for January show 31,836 mt. These figures are in contrast to Turkey's monthly average for rod imports to the US in 2008, of 10,300 mt, and are also significantly higher than the rod tonnage imported from Turkey in the corresponding months of December 2007 and January 2008 - 3,530 mt and 400 mt respectively. Also, while Chinese mills are still, by and large, absent from the Gulf market, there are some South American offers, also available at the competitive levels being offered from Turkish mills.
Traders report high inventories of unsold rod tonnage at US ports, and many end-users are heard to have high rod inventory levels as well. As one US rod trader explained, "Wire rod has probably been the hardest hit by the economy out of any steel product, as it depends on automotive and housing more than any other product. The combination of the terrible demand from those sectors and the high rod inventories is what's driving the market down."
This rather grim outlook is shared by many. But on the bright side, while the market may be in store for some further price softening, the worst of the price decreases seem to be behind us. Until demand starts to rebound, prices will probably continue to register minor fluctuations at around the current low levels.