NEW YORK Wire rod buyers are poised to accept higher prices from domestic mills despite endemically weak demand and flush import volumes, rod buyers and mills said, as rising scrap tags prompt an uptick in steel prices.
Gerdau Long Steel North America, Tampa, Fla., announced a $30-per-ton ($1.50-per-hundredweight) increase on wire rod Nov. 1 following a $20-per-ton ($1-per-cwt) increase from Nucor Corp. in October (amm.com, Nov. 1), but those increases werent reflected in transactions.
However, when the announcements were made, customers said, mill representatives had assured them that there would be no immediate increases on new orders.
But pricing sentiment has turned in the past few weeks, with rod buyers now expecting an increase and mill sources preparing to reinforce higher rod prices if scrap settles higher.
"Theyre going up. The increases will be a little of this and a little of that. They can get it done by the end of the year. If they can get $20 to $30 per ton between now and the end of the first quarter theyll be happy," one rod buyer said.
"When I book for December, well be up $30 (per ton)," according to a second rod buyer, who is accepting an increase.
Keystone Steel & Wire Co., Peoria, Ill., introduced a $30-per-ton ($1.50-per-cwt) increase on wire rod Nov. 7 (amm.com, Nov. 8), just as AMMs assessment of shredded automotive scrap prices in Chicago settled $31 per ton higher (amm.com, Nov. 7).
Mills and rod buyers havent yet negotiated an increase, but deals are expected to be made this coming week at higher prices.
One mill source said mills would push for increases greater than scrap if they could, as they try to make up for thin margins. But other mill sources said their customers might not accept price increases above the gains in scrap due to weak demand.
"All the mills have been beaten up because of foreign imports, so wed like to see prices come up (more than scrap). But I dont see the demand for it," a second mill source said.
Demand for domestic wire rod has been poor in most regions, mill sources and rod buyers said, and with few purchases of high enough volumes to justify discounting, mills have mostly stopped cutting significant deals.
A third mill source said his facility is buying less scrap because of low finished wire rod demand, but added that he likely would still push through an increase.
"Business is slow, so I cant justify the increases. Were doing a very minimum scrap buy, but thats just me. I just dont see how theyre coming up with all the scrap increases. I dont know if the demand is out there," he said.
If a trade case is filed against China in 2014 (amm.com, Oct. 22) and the price increase fails to take hold, mills will point to the failure of a price increase in the face of overwhelming import volumes, two buyers said.
"My best guess is, (the price hikes) are kind of part of the trade suit process to demonstrate to the (International Trade Commission) that they tried, because as soon as they raised prices they said it doesnt really mattertheyll do what scrap does in November," a third rod buyer said.
For now, mesh-quality wire rod remains around $630 per ton ($31.50 per hundredweight), industrial-quality rod at about $640 per ton ($32 per cwt), high-carbon rod at $680 per ton ($34 per cwt) and cold-heading-quality rod at about $770 per ton ($38.50 per cwt).