TORONTO Price hike attempts by a number of U.S. wire rod mills appear to have fallen apart due to a combination of weak demand from the construction sector, increased imports and expectations of lower scrap prices.
But while it appears the increases did not stick, they may have served to keep domestic prices from sliding much further, market sources suggested. "Maybe the best defense (against falling prices) was a good offense," one rod buyer said.
A second rod buyer agreed. "(The increase letters) had more to do with a fear by some that they needed to take a position to hang on to what they had, and they didnt want to see further erosion," he said.
A number of U.S. wire rod mills announced in mid-March price increases of $20 per ton ($1 per hundredweight), including Keystone Steel & Wire Co., ArcelorMittal Long Carbon North America and Charter Steel.
Charlotte, N.C.-based Nucor Corp., however, did not announce an increase, which some market sources said may have contributed to other mills inability to push through their own hikes. But others disagreed, contending that Nucor generally does not set the tone for price moves in the rod market and may have been used as a scapegoat by other mills after they found their own increases unsuccessful.
Despite the announced increases, domestic wire rod prices have actually dipped slightly over the past month, sources said. Prices for industrial-quality low-carbon rod have eased to about $36.50 per cwt ($730 per ton) f.o.b. mill, sources said, with a handful of buyers reporting offerings from major mills as low as $35.50 to $36 per cwt ($710 to $720 per ton).
High-carbon rod prices also have slipped slightly, easing to $40.50 per cwt ($810 per ton) f.o.b. mill from around $41 per cwt ($820 per ton) a month ago, although prices are said to vary depending on grade, mill and end-use market.
Prices of cold-heading quality (CHQ) rod have fallen further still, especially as major input No. 1 busheling scrap in Chicago continues to take a hit, sources said. CHQ rod prices were reported to have dropped to $43.50 per cwt ($870 per ton) f.o.b. mill from around $44.50 per cwt ($890 per ton) previously, despite relatively robust demand due to strength in the automotive market, which remains much healthier than construction.
One driver behind the apparent price softening is strong import volumes. A third rod buyer said he initially accepted the higher prices on some recent rod orders, a move he regretted later as it became clear that increases were not generally holding up. "Availability has not been an issue," he said. "And (imports) may have curtailed the ability of (domestic) rod producers to push through some of the increases. It effectively puts a cap on pricing and what they can expect to get out of the market."
The United States was set to import 118,807 tonnes of wire rod in March, according to license data from the U.S. Commerce Departments Import Administration, up 9.7 percent from preliminary imports of 108,340 tonnes in February and nearly double the 60,778 tonnes imported in January. Some sources said that number could surge further as the year progresses as an influx of material from China is expected to enter the U.S. market in the May-June timeframe. But others said the wave might slow after that, given increased prices from overseas suppliers and the long lead times and other costs associated with imports.
"A gap developed between offshore material and (domestic material), and it certainly stimulated import purchases," the first rod buyer said. "But overall there is still a great deal of caution on the part of rod buyers. They dont want lead times to get stretched out too far on large percentages of their business. Volatility is still out there, even if its not apparent right now."