*Correction: Rocky Mountain Steel Mills raised their rod price by $178/nt, not $190/nt as originally reported on April 10.
Domestic wire rod prices in the US are expected to rise significantly in the coming weeks following the major price hikes set by some leading North American rod mills.
Two rod mills, Illinois-based Keystone Steel and Wire and Ontario-based Ivaco Rolling Mills, have both recently announced price hikes in two phases of $75 each. Both mills say they will raise rod prices by $75 /nt in April and by another $75 /nt in May, for a total price increase of $150 /nt, roughly the same amount that scrap prices rose in April. Then last week, Rocky Mountain Steel Mills (RMSM) announced that for new rod orders, effective immediately, it would add a scrap surcharge of $150 /nt ($165 /mt or $7.50 cwt.), while raising its energy surcharge from $12 /nt ($13 /mt or $0.60 cwt.) to $40 /nt ($44 /mt or $2.00 cwt.), making for a total increase of $178 /nt ($196 /mt or $8.90 cwt.). The company said its base price will remain unchanged at $39.50 cwt. ($871 /mt or $790 /nt), and taking into account the surcharges, RMSM's new, yet to be accepted price is $49.00 cwt. ($1,080 /mt or $980 /nt).
While other major rod mills like ArcelorMittal and Gerdau Ameristeel have yet to announce matching price increases, it is expected that most mills will soon announce similar price hikes, though they may not be of the same magnitude as RMSM's increase. After all, rod buyers have already been complaining about rod prices being too high and they tell SteelOrbis that they are shocked by the above mills' recent price moves. On the other hand, rod mills must pass along their escalating raw material costs, and with cheaper import options being nonexistent (and existing import offers already above $49.00 cwt.), there is a good chance that the mills would be able to pull off such a major price hike.
Also, sales people at the American mills, many of them owned by international parent companies, are under pressure to bring their US rod prices in line with the international prices. SteelOrbis believes that a significant portion of the increases will go through, but perhaps not the full increases, at least not yet.
The announcements are still fresh and need to be digested, but spot prices for domestic rod should at least rise by approximately $4.00 cwt. ($88 /mt or $80 /nt) going forward. Taking this into account, low carbon rod prices should now range from $43.50 cwt. to $44.50 cwt. ($959 /mt to $981 /mt or $870 /nt to $890 /nt) FOB mill, while high carbon prices should range from $46.00 cwt. to $47.00 cwt. ($1,014 /mt to $1,036 /mt or $920 /nt to $940 /nt) FOB mill. As the dust settles, these numbers will have a strong tendency to adjust upwards in the coming weeks.
Many wire drawers, especially in the West and Gulf, report that they are falling dangerously short on inventories. The East Coast seems to have a bit more plentiful rod supply, although new scrap tightness may cause East Coast rod mills to fall short on their scrap purchases, thus causing output reduction.
Don't expect much relief from imported rods either. Import prices are on the rise as well, and offers are scarce. Offers from China have been particularly scarce in the past week; Turkish offers are available, but at very high prices. However, customers are biting, and getting ready to step up to the high prices since domestic availability is so limited. Traders say they are preparing to book tons at the new price levels that Turkish mills are asking for and have been able to raise their prices for customers by approximately $0.50 cwt. ($11 /mt or $10 /nt) in the last week.
Mesh quality rod prices from Turkey currently range from $50.00 cwt. to $51.00 cwt. ($1,102 /mt to $1,124 /mt or $1,000 /nt to $1,020 /nt) FOB loaded truck, in US Gulf ports. Turkish asking prices have remained relatively stable in the past two weeks, but as raw material prices are expected to continue rising, more price increases for Turkish longs imports are anticipated. The same goes for Chinese offers, which as of last week, were only slightly under the Turkish levels; however, traders are still not certain if the Chinese mills are serious with their offers or if they are just testing the market.