US wire rod market waits for inventory correction

The import wire rod market is still trending up, with prices increasing by approximately $0.50 cwt. ($11 /mt or $10 /nt) since last week. Most import wire rod offers to the US now range from $23.75 cwt. to $24.75 cwt. ($524 /mt to $546 /mt or $475 /nt to $495 /nt) for mesh grade and from $25.50 cwt. to $26.50 cwt. ($562 /mt to $584 /mt or $510 /nt to $530 /nt) for drawing quality. However, certain Chinese mills are offering a small discount for Chinese grades and for sizes 6.5 mm and larger. As the US wire rod market is still not that strong, many typical import sources are offering to destinations other than the US. This is especially the case for IQ grades. Usual IQ sources such as Trinidad, Venezuela, and Mexico are now offering to the strengthening markets in Latin America and Europe instead of to the United States. US wire rod inventories are getting lower overall, though there is still a larger wire rod supply than rebar due to the surplus of Chinese wire rod imports that arrived during the second half of last year. The pricing gap between rebars and wire rod is widening almost daily and in some instances is as high as $100 /mt. However, wire mesh producers are not unhappy about the higher rebar prices since mesh and rebar producers in many instances are competitors for the same end-use applications. The current gap between wire rod and rebar prices might allow welded wire mesh to gain a larger market share and possibly attract higher prices as well. Add to this the fact that shredded scrap prices are also trending upwards, and we have a situation where domestic wire rod mills will be asking for higher prices. It is expected that they will announce a price increase for April shipments. Some market players even predict a tight supply situation for the second quarter. For now, domestic prices 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. Preliminary license data from the US Import Steel Monitor shows that during the month of December, the US imported a total of 152,694 mt of wire rod compared to 193,998 mt in November and 236,278 mt in October. Wire rod imports for January thus far total 150,358 mt. China remained by and large the largest import source for wire rod to the US in 2006, exporting a total of 1,145,449 mt from January through November 2006, followed by Canada at 271,833 mt, and Turkey at 227,631 mt.