CHICAGO After taking a
dip this month, wire rod prices appear poised to reverse course
in December, although market sources differ on how much and for
how long the recently announced increases might stick.
Tampa, Fla.-based Gerdau Long
Steel North America was the latest domestic mill to throw its
weight behind a recent round of price increases (
amm.com, Nov. 13). The steelmaker said in a letter
to customers Wednesday that it plans to boost prices on all
wire rod products from its Beaumont, Texas, and Jacksonville,
Fla., mills effective with Dec. 1 shipments. Most grades of
wire rod will see an increase of $50 per ton ($2.50 per
hundredweight), while tags for cold-heading quality rod are
slated to move up $55 per ton ($2.75 per cwt).
But November tags remain down on
continued slow demand in some sectors and lower scrap prices
last month (
amm.com, Oct. 10). AMM has reduced the
price for mesh- and industrial-quality low-carbon rod to $652
per ton ($32.60 per cwt), down 5.8 percent from $692 per ton
($34.60 per cwt) last month.
Some market sources said an
influx of imports (
amm.com, Nov. 9) also was putting pressure on
domestic mills to either lower tags or cut back production to
reduce a surge in supply that is expected to continue into the
Other sources questioned how
domestic mills could continue to raise prices in the face of a
market already characterized by relatively plentiful supply,
short lead times and a big spread between delivered prices from
overseas and domestic offerings, in addition to a weakening
outlook in emerging markets.
"If China chooses to give rod
away, that is their decision and there is not a lot we can do
about it," one mill source said. "But I dont see people
running away" from domestic mills.
One rod buyer reasoned that
domestic mills were increasing prices not only to cover their
scrap costs but also to position themselves better for
discounting, should that become necessary. "When they discount,
theyll be discounting from a higher level," he said.
Another rod buyer questioned
whether domestic mills would engage in much discounting. He
said current pricing was more reflective of scrap trends,
noting that buyers who received the full amount of scraps
decline last month would most likely pay for the full increase
A third buyer said mills likely
would try to stick to their guns but would nonetheless have to
fight for market share to keep acceptable volumes in their
mills. While scrap prices might see a traditional seasonal
uptick over the winter months as flows slow, tags could turn
down again in the spring, barring a more widespread uptick in
demand, he said.
Still, he cautioned against
being overly pessimistic, noting that the automotive sector
appeared poised for sustainable growth and that the long-term
prospect of low-priced natural gas in the United States should
bring more industry back to the countrytrends he said
should lead to better demand later in 2013 and 2014.
Others said the doom and gloom
about the economy had been largely overhyped. One rod
distributor said his company recorded a solid October and looks
set to have another strong month in November, and predicted
that the increase would hold in full.
He also brushed off concerns
about imports, noting that low river levels in some regions of
the United States meant that some barges have not been able to
carry full loads. That could mean imports will arrive later
than expected for some rod consumers, leaving them looking to
buy domestic material in the interim, he said.