NEW YORK Wire rod market participants doubt that Gerdau Long Steel North America, Keystone Steel & Wire Co. and Nucor Corp. will be able to pass along recent price increases to domestic consumers due to lackluster demand, plentiful supply and competition from cheaper imports from China, wire rod market sources told AMM.
Charlotte, N.C.-based Nucor raised transaction prices on all wire rod products by $23 per ton ($1.15 per hundredweight) effective with shipments Feb. 1, the company said in a Jan. 15 letter to customers (amm.com, Jan. 16).
Keystone also increased wire rod by $23 per ton effective with shipments Feb. 1, the company said in a Jan. 16 letter to customers (amm.com, Jan. 21), while Tampa, Fla.-based Gerdau lifted wire rod products by $25 per ton ($1.25 per cwt) effective the same date, the company said in a Jan. 17 letter to customers (amm.com, Jan. 17).
"The mills have raised prices because they can. Ive spoken to several people in the market who have said that they will not pay the increase. There is a lot of steel available. Its not like business is robust. People are buying wire rod on a hand-to-mouth basis," a source at a Midwest wire rod distributor said. "The market is unlikely to pay the increase. A mill announcement and a mill increase are two different things. Its not demand driven. With domestic stock and imports coming in from China, I have enough material to last for several months."
Wire rod market sources told AMM that domestic demand for wire rod is weak and mills cannot justify raising prices.
"Perhaps people who buy small tonnages on a month-to-month basis will pay some of the increase. I dont think they will get the full increase with the larger buyers. Everything is slow," a Midwest buyer said. "There is not enough strength in the market to sustain an increase. If the demand was there coupled with higher scrap prices, then they could do it, but demand is slow and it looks like scrap prices are softening."
Snow and Arctic temperatures this winter have stopped construction, which has slowed buying and kept demand for wire rod depressed, market participants said.
"They may be able to push through $10 per ton. They will get nothing from some people. The buyers who purchase large volumes will be able to negotiate a good price since its a buyers market," an East Coast buyer said. "If they get it, it is dependent on the size of the customer. There is an imbalance between supply and demand. Inventory levels are stable, and they have been for the last couple of months."
Domestic wire rod producers have been competing with lower-priced imports from China, which has made it challenging for mills to pass on increases to domestic buyers, sources said.
Several wire rod buyers polled by AMM said they buy a mixture of domestic and cheaper imported wire rod from China to balance their costs.
Gerdau Long Steel NA, Keystone and Nucor declined to comment when contacted by AMM.