US scrap pricing dropped late last week as expected, but not significantly enough to pressure domestic mills to lower transaction prices for wire rod.
The decrease of $40/lt ($1.79 cwt. or $36/nt) for shredded scrap has given domestic mills the opportunity to expand profit margins that were substantially narrowed during the previous months' rapid raw material price hikes. Although wire rod mills do not release official announcements regarding raw material surcharges and base prices, they are expected to keep transaction pricing neutral for industrial quality grades along with other long products, such as rebar and structural beams.
Currently, domestic mills are still offering industrial quality wire rod in the range of $32.00 cwt. to $33.00 cwt. ($705/mt to $728/mt or $640/nt to $660/nt) ex-Midwest mill, but even though they are busy, their prices are somewhat negotiable for large tonnages and other attractive offers, keeping the domestic pricing trend neutral.
Besides the softening scrap prices, a steady incline in demand has also strengthened the mills' position. At the American Wire Producers Association's (AWPA) annual conference and Long Products Supply Chain Symposium held earlier this week in Milwaukee, several wire producers and buyers expressed reserved confidence in the economic recovery. While no one is enjoying soaring profits or rapid inventory turnaround, sales are steady and most companies are finally back in the black after several quarters of losses. The symposium topics focused on how to thrive, not just survive the recovery, and how companies can position themselves for a successful future. As Nucor Chief Operating Officer John Ferriola put it, "Great challenges produce great opportunities." There is already an indication that currently well-performing sectors such as automotive, agricultural equipment and appliances are experiencing sustainable growth, even though construction is still lagging behind.
Demand overseas is not showing as much improvement; Turkish wire rod producers have slowed down their scrap purchases lately, and although they are expected to resume importing scrap from the US sooner rather than later (in light of the decreased US scrap prices), they have kept wire rod prices the same from last week. Turkish wire rod is still offered in the range of $32.00 cwt. to $33.00 cwt. ($705/mt to $728/mt or $640/nt to $660/nt) duty paid, FOB loaded truck in US Gulf ports, with many spot offers falling in the middle at $32.50 cwt. ($717/mt or $650/nt).
Chinese wire rod producers have not made many offers to US buyers recently, but they have been experiencing a mild slump in their own wire rod market. The last offers heard were still in the range of $32.00 cwt. to $33.00 cwt. ($705/mt to $728/mt or $640/nt to $660/nt) duty paid, FOB loaded truck in US Gulf ports.
Import pricing trend for both Turkish and Chinese rods are pointing slightly down for the time being.