High levels of competition

The global long steel products market is still showing a high degree of competition. Demand is strong in North America, the Persian Gulf region and the Southeast Asian market. However, other markets like the EU and South America are still showing some weakness.

China is still influencing the perception of oversupply in the global long steel products market coupled with low prices.  Indeed, availability is high, and mills are managing their production levels in order to adjust. There is also continuous effort in different markets to establish protection measures against the imports coming from China. The most interesting aspect of the market is that, with each new protectionist action against a certain exporting country, in most cases China, new business prospects can open up.

Better correlation between scrap and iron ore prices

The correction observed for all major commodities has been an effect of the drawdown of the third round of quantitative easing (QE3) in the USA and stimulus activity by other countries which has led to the strengthening of the US dollar. Ferrous scrap prices were late to see this correction but are now closing in on a more normal multiple over iron ore prices. It is of course better news for the market to see scrap and iron ore prices having a better correlation. Having said that, there is still some way to go to achieve a balance between scrap-based and iron ore-based steel production costs.

Business activity levels have declined in the ferrous scrap market over the past quarter. Slack demand through the supply chain will continue to be observed until prices stabilize. On the other hand, margins are becoming acceptable due to lower raw material prices.

Long products market appears to have hit bottom levels

The long steel products market scenario has probably sunk to its worst, or, in other words, bottom level. Buyers will be in the market in the coming weeks to order material for January 2015 arrivals and this is expected to boost market sentiment. News on the removal of Chinese export rebates could also give the market a lift.

Competition is still very strong in the market as supply exceeds demand in a few areas. It may even get stronger once Ukrainian supply gradually comes back to the market. The long steel products market is highly competitive but it can be described as stable with some promising perspectives.

Declining scrap prices likely to limit market share of Chinese exports

When global ferrous scrap prices fall in line with iron ore prices, Chinese exports will likely be less able to claim a very large share of the steel market in the long term. The scrap market definitely lacks stability, but it is declining steadily and has been doing so since August. The outlook remains gloomy for the next month as there seems to be plenty of scrap and demand is slowing, especially in Turkey. Market prices look set to break under the $300 level in the Turkish market and, with talk of the European Central Bank (ECB) adding monetary stimulus, the euro will likely lose value against the US dollar, reducing European scrap export prices.

Some slight improvement expected in New Year

It is very difficult to give an outlook for the global long products market for the first quarter of 2015 even though bookings are now starting to drag into January. That said, the market may receive a New Year push and is expected to be slightly better than the current situation.

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