Short Range Outlook : March 2017
Still improving supply-demand balance creates brighter picture in global longs market
The supply-demand balance continues to improve in regions like the US, Europe and Asia, contributing to a brighter picture in the global long steel products market.
US market boosted by restocking and infrastructure spending expectations
Demand has improved in the US as buyers have been restocking. In addition, President Trump’s promise to spend one trillion dollars on infrastructure has hyped up the market even more. However, the reality is that it will take two to three years down the line to start such projects and they will all have a “Buy American” clause which will not excite importers.
Trade from Turkey and Taiwan to US to continue after preliminary duty announcement
In the immediate term, import supply into the US will be affected by the preliminary duties in the antidumping and countervailing duty investigations being somewhat higher than expected against imports from Turkey and being outrageously high against imports from Japan. Nevertheless, the margins against Turkish and Taiwanese imports will allow trade flows from these sources to continue, but the same will not be the case for imports from Japan. The resolution of the antidumping investigation against reinforcing bar imports in to the US may help end uncertainty and take the market up another step.
Suppliers find new alternatives amid import restrictions
In other areas where exports have been adversely effected by restrictions imposed in destination markets, suppliers are finding new alternatives.
Good news on the Chinese front
Demand in China is also good and prices there are on an upward trend. It seems highly likely that China has indeed taken over 80 million metric tons per year of production out of the market, as its export volume has been reduced significantly despite its huge domestic output. The result is that Turkish products are more competitive in the export markets.
EU mills unable to raise prices significantly despite positive demand
EU mills, on the other hand, are not able to increase prices significantly although demand is very good in Germany, the Netherlands and the UK.
No sign of recovery in Latin America in short term
Having said all the above, demand in Latin America remains weak with no sign of recovery in the short term, despite the overall positive expectations.
Business sentiment continues to improve in global market
Business sentiment in the global long products market is pretty positive and keeps improving, though there have been fluctuations in certain areas due to ongoing instability. Buyers and sellers agree that multiple markets are gaining strength simultaneously, while antidumping uncertainties are now out of the way for imports into the US at least for the time being. Prices and spreads are stable at higher levels than those of the previous year. However, global production has started to move up, which is not good. Chinese mills should receive good domestic demand in March in line with their anticipations, so that the supply-demand balance should remain as it is in the global market.
Firm ferrous scrap prices should keep production costs at current levels
Ferrous scrap prices are up and maintaining their strength, which should keep the actual cost of production at current levels at least for a while. With the “Buy American” provision, we can foresee fewer exports of ferrous scrap from the US. We may even witness an increase in scrap exports to the US depending on future developments, which could lead to a shortage of scrap in the market.
Competition is strong but within reason
Competition in the global long products market is still strong but within reason. Lead times for delivery of raw materials have increased.
Outlook is positive but a certain degree of unpredictability remains
It is difficult to predict the market in the short term. The outlook is satisfactory to very good in certain areas and prices should increase due to the recently announced preliminary antidumping and countervailing duty rates against imports into the US. However, there are still too many factors outside of the regular trade causing a certain degree of unpredictability.
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