Competition heats up and margins suffer in global long steel market

Trade restrictions have shut down a few significant markets for reinforcing bar exports recently, and so some exporting countries have been obliged to divert significant quantities of exports to other destinations, creating severe supply pressure on prices, and more importantly making profit margins practically non-existent.

Demand for long steel products has not been picking up in the market as had been expected, especially in northern Europe due to very cold weather conditions as well as the uncertainty in the market. However, demand seems to be maintaining its levels in the Asian, MENA, Central and South American markets. A slight improvement in market conditions has been seen only in the South American market thanks to seasonal conditions there. The sentiment in this market has improved as a result of better demand.

Demand in the ferrous scrap market has also been weak recently but the situation might change sooner than expected due to adverse weather circumstances particularly in northern Europe.

Competition is extremely strong in the market and is heating up even further. As soon as
supply in one market becomes tight, new offers appear from new sources. The number of countries where low demand prevails has increased, and suppliers in such countries are searching for new markets. It looks like fierce competition will prevail in the long steel market for quite a long period of time due to excessive installed capacities.

On a positive note, the raw material price changes have not been reflected in finished steel prices, while the significant price increases for flat rolled steel products could possibly provide support for price increases in the long steel product markets as well.

In the meantime, ferrous scrap availability at scrap terminals is getting lower as the intake has been low recently due to winter conditions.

Outlook for February:

The long steel market is stagnating in Europe, bullish in China but fluctuating and unstable elsewhere. That said, there are signs that the depression in Europe is starting to bottom out. Inventory levels are low in the European and North American markets, giving hope for future orders.

But overall, the outlook appears very difficult for the mills as the market remains so unpredictable.

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