Wire Market Turmoil 2018
As we continue to follow the drama of the high carbon content steel markets over the last 4 months, we thought you might appreciate an informed update. As I am sure you are aware, there has been a high level of unprecedented and unfavorable activity throughout the global steel “rod” markets. Since “rod” is the raw material from which our wire is drawn and given the global consolidation of rod suppliers in the world market over the last several years, we find ourselves more directly impacted by the turmoil and international intrigue of the last four months.
What is happening in the global market:
- Over the last several years, a multitude of “anti-dumping” lawsuits have been filed with the US Department of Commerce by American companies claiming that foreign companies are dumping raw materials in the US at less than fair value.
- President Trump has of 3/1 approved an “anti-dumping” tariff resulting from these lawsuits on imported steel which will not only increase the price of imported steel by 25% but is likely to cut imports from most countries.
- We have already seen the effects of tariffs resulting in limited availability of rod imports not only from the countries accused of dumping, but other imported rod sources as well. In addition, there is talk of adding on restrictions of imported wire. The demand on both domestic rod and possible wire manufactures will certainly result in more price increases, and perhaps lags in the availability of wire. There is even talk of allocation of steel rod and as a result, steel wire.
- That, combined with the approach of the spring and summer construction season, will place a significant increase in the demand on domestic wire rod mills.
- There have also been notable activities in the trucking industry with the implementation of electronic logging devices in December. I’m sure if you are not already seeing this impact your pricing for other components, it will soon be apparent.
Who is Affected:
- Market elements such as scrap cost, seasonal usage, legislation, and other factors affect our industry from the top down.
- Those affected first by these developments are the rod mills, who are specialized single purpose steel mills which only produce “rod.”
- Once the rod is formed, it is shipped to wire mills, who draw the rod into wire that is usable for manufacturers like us. In our case, high carbon steel in rod shape with specific metallurgical properties are used.
- The wire is then shipped to us and formed into springs, then shipped to you.
- Everyone in the process, from rod mills to you, is affected by these market elements.
How it affects us:
- We have seen an increase of about 25% since 2016, and are expecting more very soon.
- We are now seeing such a significant increase in these prices that we have included some of the increases in our quotes we have already generated in 2018.
- Several of our suppliers indicated that the market is so volatile right now, they are unable to predict what the wire prices will be by summer when the construction industry is reaching its peak.
- The only sure thing is that wire prices will continue to rise, and that we should expect additional increases before the end of the second quarter.
What we are doing:
- In order to stay ahead of the situation, we are watching the wire market daily and staying in constant contact with wire mills about their prices and availability.
- We have been reaching out to all wire mills, domestic and foreign, available to us in order to obtain the best pricing for wire.
- We have attempted to buy a limited supply ahead of price increases for customers with annual purchase orders
- We will continue to stay on top of developments in the market to ensure that we are manufacturing your springs at the lowest possible cost to you. We strive to keep you updated on this situation as it develops.
What you can do:
- You can agree to an annual purchase agreement, if you haven’t already.
- You can forecast your needs for us so that we can attempt to stay ahead of future price increases.
The purpose of my post today is to share this information with you to make you aware that the price increases show no signs of slowing down. We will be in contact with you about your specific options for the future.
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