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US mills brace for ‘flood’ of Chinese rod

Keywords: Tags  wire rod, China, Wire rod imports, hot-rolled bar, U.S. Dept. of Commerce, import license applications, Samuel Frizel, wire rod prices


NEW YORK — Domestic wire rod mills and wire drawers are bracing for a significant increase in Chinese rod imports, with stepped-up shipments from the Asian nation into the summer and early fall already affecting prices.

"There is a lot of Chinese rod coming in," one wire rod trader said. "Chinese wire rod mills have dropped their price and I’m thinking of jumping in."

About 1,080 tons of Chinese wire rod are poised to arrive on U.S. shores in May, according to import license application data from the Commerce Department’s Import Administration. But applications for Chinese hot-rolled bar imports were at about 69,300 tons so far for May, most of which is actually wire rod, according to several sources.

The majority of Chinese wire rod imports are most likely misclassified as hot-rolled bar (amm.com, Jan. 11).

May’s hot-rolled bar import applications from China are nearly quadruple April’s applications level and almost double March’s import figures. But one trader said that only about the first 10,000 tons of hot-rolled bar import data actually represents hot-rolled bar.

Importers said wire rod imports from China will continue to climb in the coming months, with many rod buyers placing orders expected to hit U.S. ports in late summer.

"We are beginning to see worry about China again. There are all these signals from some of our customers," one mill source said. "They are hinting that huge imports are coming in."

"I think their fears are generally justified," one trader said of domestic mills’ anxiety over Chinese imports. "There’s (likely) an extra 100,000 tons hitting over the course of this year."

Because much of the wire rod that has arrived in the U.S. has been misclassified, making sense of historical Chinese import data is difficult—and anticipating future wire rod imports is even more challenging because no single buyer has a full picture of scheduled rod imports. One trader estimated, however, that U.S. ports would see a 10- to 15-percent increase in rod deliveries this year.

A number of rod buyers told AMM they were ordering increased shipments of Chinese material for mid-summer to early fall arrival at increasingly low prices. "We’re going to be bringing in a lot more (Chinese rod). It’ll be a significant percent (of our inventory)," said a high-carbon-rod buyer in the South.

The price spread between imported rod and domestic rod was about $80 to $100 per ton earlier this month, according to several sources. But one buyer said that because domestic mills lowered their prices earlier this month for June shipments, the spread has narrowed, likely exerting further downward pressure on import prices.

Import transaction prices for low-carbon wire rod at the Port of Houston have been reported as low as $570 per ton ($28.50 per hundredweight) for summer to early fall arrival, but sources say prices are softening. One buyer said he was quoted at less than $540 per ton ($27 per cwt) for Chinese rod for early fall arrival.

"I guarantee that’s going to drive the domestic pricing down, because whoever’s buying those fill-ins is not going to be buying those fill-ins anymore," said the buyer, noting that the increased Chinese volumes meant that U.S. buyers would be turning less to domestic mills to support their inventories.

With additional wire rod capacity coming online at Charlotte, N.C.-based steelmaker Nucor Corp.’s Darlington, S.C., mill (amm.com, April 19) and more product scheduled to hit U.S. shores, domestic mills could face difficulties maintaining their margins.

"I think it is going to come in in a torrent in the next four, five months. It’s going to be a flood, and when I say ‘flood,’ I’m talking about quantities in excess of 40,000 to 50,000 tons per month," the mill source said.

"It’s going to be a tough summer," said a rod buyer in the Midwest.


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