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Market mixed on recent rod price hikes

Keywords: Tags  wire rod, price increase, Gerdau Long Steel North America, imports, automotive, scrap, demand, steel long products

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 (, 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 (, 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 (, 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 first quarter.

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 don’t 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, they’ll 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 scrap’s decline last month would most likely pay for the full increase in November.

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 country—trends 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.

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