Short Range Outlook – September 2017

Further improvements in global long steel market amid lack of pressure from China

Demand in the global long steel products market is good and has even been increasing slightly in almost all markets as there is no pressure from China on the international market.

Strong domestic steel consumption in China reduces prospects for Chinese exports

Some months ago, the consensus of steel sector analysts was that steel demand in China would decrease during the remainder of the year but this is not happening. With strong domestic consumption of steel in China, the prospects for Chinese steel exports continue to decrease. Ongoing increases in demand raise productivity and utilization rates for steel mills elsewhere. In addition, some major reinforcing bar markets, like Turkey and the EU, are growing, while the regionalization of the steel trade has been strengthening pricing levels. Latin America, on the other hand, is probably the only exception, with prices there remaining weak.

Low inventories, low interest rates and weaker dollar also help boost global market

In addition to declining exports from China, overall low inventories, low interest rates and the cheaper US dollar are also helping to boost the global market. Better economic conditions for GDP growth around the globe likewise help a lot, as does the delay in possible protectionist measures by the Trump administration under Section 232.

Low US preliminary CVD rates for Italian and Turkish wire rod surprise the market

The US DOC recently issued affirmative preliminary countervailing duty rates for wire rod imports from Italy and Turkey. However, the initial low countervailing margins announced  must have surprised the market and the petitioners. At present, the market is awaiting the antidumping decision affecting Belarus, S. Africa, S. Korea, Spain, Turkey, the UAE and the UK, which may also turn out to be a surprise.

Mills in EU finally able to raise prices amid limited imports and higher costs

Due to limited import possibilities, mills in the EU have finally been able to increase their sales prices. Their prices are also driven by higher costs for scrap and electrodes. Demand in the EU is very good compared to previous years. That said, cut and bend prices are still very much under pressure due to competition from domestic fabricators, most of which expected to see declines in prices and thus accepted long-term orders. Now the fabricators are in a really difficult situation, which local mills are taking advantage of. The uncertainty in the market resulting from the Section 232 investigation has contributed to the further upward movement of scrap and steel prices.

Rising raw material costs push producers to raise their long steel sales prices

The upward trend in raw material prices is pushing producers to increase their sales prices for long products. It is noteworthy that in July Turkish crude steel output rose to 3.3 million metric tons, up 30 percent from 2.6 million metric tons in the same month last year. Accordingly, ferrous scrap demand from Turkey – the world’s leading scrap importer – is significantly stronger this year, pushing import scrap prices in Turkey to reach their highest levels of the past three years.

Chinese suppliers highly unlikely to re-enter billet export market

The shortage of billets, or the lack of extra billets in other words, is preventing several rolling mills from producing more long products. The price of billet today is considered to be uneconomical, unless scrap and other inputs increase further in price. The curtailment of electricity in China means that electrically-produced billets will be produced less and that BOF mills will be chased for more billets and will thereby also increase prices or keep prices at the present high levels. Prices would have to go down by around 7-10 percent in order for Chinese suppliers to re-enter the billet export market. But that seems highly unlikely at this point.

Competition is decreasing and more balanced in the absence of China

Competition in the market is decreasing and is much more balanced due to the absence of China, and may be described as being fair and modest.

Very good outlook for next quarter provided there is no surprise from China

The current status of the market is stable and the outlook for the next quarter is very good as long as there is no surprise from China. Increasing prices and a solid supply-demand balance combined with low inventories have given everyone reason to believe that the strength of price levels will be sustained up to Christmas. The market is in outstanding shape but protective measures still pose a real threat for the future.




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