Steel Wiredrawing and Steel Nails and Spikes

SIC 3315

Companies in this industry

Industry report:

This category covers establishments primarily engaged in drawing wire from purchased iron or steel rods, bars, or wire, as well as those which may be engaged in the further manufacture of products made from wire. Establishments primarily engaged in manufacturing steel nails and spikes from purchased materials are also included in this industry. Rolling mills engaged in the production of ferrous wire from wire rods or hot-rolled bars produced in the same establishment are classified under SIC 3312: Blast Furnaces and Steel Mills. Establishments primarily engaged in drawing nonferrous wire are classified in other industry categories.

Industry Snapshot

Steel wiredrawing plants manufacture a wide variety of products, including barbed and twisted wire, steel baskets, brads, cable, chain-link fencing, fence gates, posts and fittings, form ties, horseshoe nails, steel nails, paper clips, spikes, staples, wire cages, tacks, tie wires, wire fabric, wire carts, wire cloth, and wire garment hangers.

There were 18,565 employees at the 814 establishments in the industry in 2010, according to Dun & Bradstreet. The average firm in the early 2010s reported 23 employees. Steel wire and related products represented the largest sector within the industry, controlling about 30 percent of the market. Wire and fabricated wire products represented 28 percent; insulated or armored cable steel, 10 percent; and steel fence gates, posts, and fittings, 4 percent.

Background and Development

The demand for steel wire evolved from the housing, construction, and automotive industries. To service these markets, steel wiremakers bought steel rod from domestic and foreign mills and drew it into wire and other related products. While steel wiredrawing companies shopped globally for the least expensive sources of steel bar, their ability to buy from foreign sources depended on the trade climate between the United States and its competitors. The rapid expansion of the Chinese, Russian, and South African steel industries led to a substantial increase in steel supplies in the 1990s. Steel consumption increased at the same time as the demand grew for wiredrawing products, particularly in housing and highway construction.

During the 1980s, increases in imports of finished products during the recession, as well as high dollar valuations, led many domestic steel wire producers to call for extended voluntary restraint arrangements and duties on imported steel wire and products. The high inflation rates, interest rates, and high value of the dollar made offshore sources of steel wire attractive and affordable for domestic users. Industry shipments dropped 21.4 percent between 1981 to 1982.

From the mid-1980s to the early 1990s, U.S. steel wire producers charged many countries with unfair trading practices, most notably with dumping product at prices less than the cost of production. In February 1989, 30 Japanese producers were subject to duties as high as 29.8 percent. The Specialty Steel Industry of the United States, which represented virtually all U.S. producers of stainless and alloy tool steels and other high technology metals, found that import penetration grew to 20.2 percent of the U.S. market, up from 18.6 percent in 1990.

Imports remained a problem for the industry. In the mid-1990s, the Specialty Steel Industry asked the Clinton administration to quickly establish a Mutual Specialty Steel Agreement with the European Union and the rest of the world on stainless steel imports. Stainless steel buyers purchased 24 percent of their product from foreign mills, depressing domestic prices. More than 500,000 tons of stainless steel were imported in 1996, spurred by a 5 percent increase in consumption.

Demand for steel wire in the late 1990s remained high as a booming U.S. economy drove the automotive and construction industries, which were the primary consumers of wire. Especially promising for wire mills was the continued rise in housing construction, fueled by low and moderate interest rates. Steel-framed housing construction became more prevalent, further increasing demand for wiredrawing products. Nevertheless, a U.S. International Trade Commission Report filed in September 1999 revealed that domestic producers struggled to remain profitable in the first half of 1999. A flood of cheap imports forced U.S. firms to slash prices. The 1997 Asian economic crisis and the currency devaluations that followed made it more profitable for wire mills based in Asia to sell their goods in the United States, especially as the Asian construction industry stalled during an economic downturn. Those countries cited for "dumping" inexpensive wire in the United States included India, Japan, South Korea, Spain, Canada, and Taiwan. Moreover, while these imports drove down U.S. steel wire prices, U.S. producers lost markets abroad, as Asian economies remained sluggish. To further compound the problem, the Russian economy collapsed in the late 1990s, eliminating another potential market for U.S. steel wiredrawing products. With the substantial rise in imports, industry shipments continued to decline, falling to $4.58 billion in 2000, compared to $5.01 billion in 1998.

Higher domestic scrap prices fueled demand for imported steel products during 2004, including steel wiredrawing products. Overall, U.S. steel imports rose 54.2 percent. As a result, imported stainless steel bars were up 23 percent from 2003, reporting 83,533 tons in 2004. Of greater importance, consumption was 11 percent, or 204,638 tons. The same held true for stainless steel rod, with 47,616 tons, 35 percent higher than 2003, and consumption of stainless steel rod was 73,641 tons, climbing 16 percent. In 2004, imported stainless steel wire was up 22 percent (41,816 tons), compared to 2003 consumption of 81,707 tons.

The steel wiredrawing industry experienced tight supply and strong demand that translated into a "seller's market." Automobile parts, wire ropes, and other specialty-use products drove the wire rod market in 2004. Industry shipments were up 13 percent in 2004 from 2003, and imports totaled 73.9 percent. Steel rod prices were on the rise as well. In 2004, the shortage of steel bar and increased scrap prices set the stage for higher prices being passed on to the customer. On July 16, 2004, Nucor Corp., Steel Dynamics Inc., and Keystone Steel & Wire Co. simultaneously announced price increases, citing higher scrap prices, and others soon followed. Steel rod was expected to climb between $10 and $20 a ton by the mid-years of the first decade of the 2000s as a result of increased demand, higher scrap costs, and surcharges.

Some relief came early in 2005 when imported wire rod fell significantly. Industry reports showed wire rod down 80.8 percent, or 52,152 tons, in January 2005, from 272,136 tons in December 2004. Despite the decline in the imported wire rod sector, other steel wiredrawing products continued to flood the domestic market.

According to industry statistics, an estimated 934 wiredrawing plants were valued at $2.6 billion in 2008 with industry-wide employment of 20,422 workers. Steel wire and related products plants increased their market share slightly to 27.8 percent, compared to 26 percent in 2005, with shipments totaling $808.5 million. Producers of wire and fabricated wire products were able to capture 21.7 percent of market share, up from 18.9 percent in 2005, with revenues of nearly $1.1 billion. Steel fence gates, posts, and fittings accounted for 12.9 percent in market share, $79.7 million in shipments. Steel cable (insulated or armored) had 5.9 percent in industry share or $130.6 million in shipments, while steel wire (insulated or armored) held 5.2 percent in market share or $205.9 million in shipped goods.

U.S. demand for wire rod in 2008 was roughly one-third compared to 2007 levels. Weakened demand continued into 2009 with steel wire rod prices plummeting by as much as 50 percent in July 2009 as demand in the automotive, construction, and manufacturing industries remained in the doldrums. One industry leader, ArcelorMittal, was forced to idle its steel wire rod operations in Georgetown, South Carolina in July 2009 as a result of "weak market conditions," according to the Chicago-based steelmaker.

Another concern for the industry was that U.S. bridge engineers were increasingly turning to concrete instead of steel as the construction materials of choice. One significant reason for this was the price of concrete remained relatively stable compared to the fluctuating price of steel. Competition from companies offering specialty metals and new processes posed an ongoing challenge to the industry as traditional markets, such as the automotive and construction industries, explored the use of lighter, stronger, and less expensive materials. The industry regarded recycling as a potentially important area in an effort to expand its market as well as it sources.

Current Conditions

According to Dun & Bradstreet, Michigan was the number one state in terms of revenues in the steel wiredrawing/steel nails and spikes industry in 2010, accounting for 12 percent of the nation's total $1.4 billion in sales. Other top-earning states included Texas (10 percent), California (8 percent), and Pennsylvania (7 percent). Ohio, however, employed the most workers in the industry in the early 2010s, followed by Texas, California, and Illinois.

Based on figures from the Specialty Steel Industry of North America (SSINA), U.S. consumption of stainless steel rod, bar, and wire increased in 2011. For steel bar, consumption was 114,034 tons, 37 percent higher than May 2010; for steel rod, consumption was 34,217 tons, up 34 percent from a year earlier; and for steel wire, consumption was 23,784 tons, representing an increase of 4.3 percent from the same time in 2010. Imports in all of these categories also increased: by 53 percent for bar, 27 percent for rod, and 14 percent for wire.

Industry Leaders

While the majority of steel wire producers were privately held firms in the early 2010s, a substantial number were subsidiaries or divisions of larger companies. Some of the largest producers included Phelps Dodge Industries Inc. of Fort Wayne, Indiana, a subsidiary of Phelps Dodge Corp.; Akron, Ohio-based Bekaert Corp., which had 2010 sales of $208.8 million; Keystone Steel & Wire Co. of Peoria, Illinois, which became a part of Warren Buffett's Berkshire Hathaway empire under subsidiary Marmon Holdings in the late years of the first decade of the 2000s; and Mount Airy, North Carolina-based Insteel Industries Inc., which had 2010 sales of $211.6 million. Former industry leader Northwestern Steel and Wire Co. of Sterling, Illinois, declared bankruptcy and ceased operations in 2001, after more than 100 years in business. A portion of the old mill was later reopened by Leggett and Platt under the name Sterling Steel Company LLC.

Workforce

Employment in the industry peaked in 1979 at 33,800 and then reached an industry low in 1985, with a work force of 20,900. While sharp increases in hiring led to employment figures of 27,100 in 1989, employment dropped through 1992 and reached 22,618 in 2000. After 2001, the U.S. Census Bureau included rolled steel shape manufacturing with steel wiredrawing in its industry census. For the newly combined category, there were 23,419 workers in 2005 and 21,042 in 2009. Of these, about 75 percent were production workers earning an average hourly wage of $20.24.

Steel wiremakers faced several employment issues in the 1990s, including spiraling health care costs and the need for fully funded company pension plans. During this time, many small companies had health care costs that exceeded company earnings.

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