It seems that demand in the global long steel products market is somewhat better after the holiday season. There have been signs of a pickup in demand everywhere in the past month, apart from the EU. The supply in the market has been adjusted accordingly, which has had a positive influence on prices. Consequently, the whole market dynamic has changed. The price spread between Chinese origin reinforcing bars and Turkish origin reinforcing bars on FOB basis now exceeds $100/mt.

EU mills’ margins squeezed, still to be seen if price rises will stick

Customers have been destocking since autumn 2022 in the EU market. Mills are running at very low capacity and now the prices in the EU are lower than in many traditional export markets. February was also a very quiet month, with very little activity. Despite the good weather, inquiries from construction sites were much lower than expected. Most cut and benders had their yards fairly well stocked and so had no need to replenish. That has put domestic mills under pressure and led to lower numbers. Raw material prices have strengthened considerably amid very low demand for finished products and mills’ margins were squeezed into the red. Mills had to increase prices or start shutting down their EAFs. By the end of February, mills announced increases, but it remains to be seen if they will be sustainable in the current environment. Imports are unable to compete with EU domestic offers. If the increases are accepted, the impact may be considerable. Lower energy prices help little because electricity prices in the region remain unpredictable.

Turkey still limited in terms of possible export destinations

Not much change has been seen for Turkish long steel exports. There are still very limited destinations where Turkey can be competitive, like Israel and Yemen. Turkish mills can only ship west in the search for a positive margin. Energy prices are helping both ways; reducing inflation and the cost of manufacturing, which creates a positive mood. But although energy prices are softening for Turkish mills, there is still a big gap with the offers coming from North Africa, the GCC and Southeast Asia. There are many countries exporting today to the markets where Turkish mills were the main players.

Turkish mills to focus on post-earthquake reconstruction work

The Turkish mills have been meeting with ministers and government officials about the reconstruction of the area hit by the recent devastating earthquakes, and they have received a very clear message from them that they will not accept any price increases for steel and cement and that they are ready to take any precautions necessary. It looks like the total demand in the Turkish domestic market will not change much, but the focus of the demand will. The government will be focusing all their efforts on reconstructing new housing for those who need shelter and so all other works will be on hold for a while.

Ferrous scrap demand increases

The general demand level for ferrous scrap increased during February and continues in March. The first quarter of 2023 has seen substantially lower energy prices, which has alleviated the strain on industries. Production levels have normalized. Subsequently, raw material inventories have had to be restocked at a higher pace. Raw material availability was outpaced by demand during the second half of February and early March. The outlook remains tight. The Turkish government had said it would impose import duties on flat steel products to promote domestic production, which would create additional demand for ferrous scrap imports. However, the implementation of the duties has been postponed in the aftermath of the earthquakes.

Scrap prices and demand on the rise in EU and US

Asian scrap prices have typically been higher than Turkish scrap prices, but now transaction prices to Turkey are about the same. Concurrently, scrap demand and prices are on an upward trend in Europe. The same is true in the US market, but the increases there are larger.

US mills remain strongly positioned, imports negligible

The US is still producing fewer tons than in 2021 and 2022. Presently, it looks like only the US mills have pricing power and very healthy profit margins. As such, imports into the US are negligible. General demand in the US is flat, though a slowdown in construction is expected in the coming months for both residential and commercial construction. Interest rates are at their highest in years and further increases are expected soon. Domestic long product prices were too low for months and have now started to move up, giving a slight chance to imports, but this will soon disappear with the increases in international scrap prices. Bulk prices have softened a bit, but stevedoring rates are high at congested ports. Labor shortages are not expected to change anytime soon.

China still constitutes a big hope for the global longs market

Now that we can consider the Covid-19 pandemic to be behind us, China, although slow, is restarting its economy. Demand is improving in the global market and the Chinese authorities are releasing positive messages about growth. China still constitutes a big hope to start the wheel running even though it has started much slower than expected after the Chinese New Year holidays, despite the previous forecasts for a rapid rebound.

Anticipated reconstruction work in Turkey provides additional support

The anticipated reconstruction works after the devastating earthquakes in Turkey are driving market expectations at the moment. Electricity prices are receding and the energy costs of mills are decreasing. Europe has lower energy prices and so its industries are able to operate more easily.

Logistics becoming easier and cheaper, bottlenecks are disappearing

Logistics are becoming easier and cheaper. Sea freight was at low levels during the winter as demand was slow and ship availability decent. Logistics bottlenecks are starting to disappear, which gives more room for new positioning and import options in markets.

Competition medium to strong, apart from protected markets

Competition in the market is medium to strong and very fragmented wherever available. There is not much competition in markets which are heavily protected. The markets are still more regional than global.

US imposes 70 percent tariff on Russian iron and steel products

The US has put a 70 percent tariff on Russian iron and steel products even though the last ex-Russia imports were seen in June 2022 due to the toxicity of Russian material and the threat of running into trouble with banking regulations. It can be assumed that the US is now leaning on Brussels to do the same.

Uncertainties in international market, except in EU, US and Turkey

There are fluctuations and uncertainties in the international markets, with the exception of the EU, the US and Turkey. The ferrous market seems to be in perfect shape to proceed.

Outlook varies, satisfactory for the US and Turkey, unpredictable for EU

The outlook also varies for different markets. It is satisfactory for the US, Turkey and many other markets. However, the unpredictability in the short term, particularly in the EU, cannot be disregarded. On the other hand, the outlook for the ferrous scrap market is very good.

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The global long steel products market is still characterized by unpredictability. China’s impact on the global markets is still an open question and this contributes to the unpredictability for the second quarter. It seems that customers heard too much talk of recession last year and were convinced that all construction would stop in 2023. Actually, it looks like Europe managed to avoid recession in 2022 and even in January Germany showed economic growth. Core inflation is going down and the situation looks much better than expected in Europe and the US.

European market still extremely quiet after the holiday period

The European market is extremely quiet since all clients have just come back from the holidays. Mills are not able find customers as they had all bought their requirements by the end of November in order not to be taken by surprise in the new year. New private housing projects in Germany have almost fallen to zero. The high costs of products combined with 8-10 percent inflation and consequent higher mortgage rates in addition to the lack of workers have made calculations unpredictable for investors. Moreover, the government has reduced funding for social housing despite its declared goal of building 400,000 apartments every year. Last year, they reached approximately 50 percent of that goal and for this year the expectation is even significantly less. On the other hand, public and industrial projects are still fine, but increasing costs, bureaucracy and appeals against every new big project of whatever nature as well as the lack of labour force delays for almost every one of them.

Overcapacity in EU cut and bend sector, price rises difficult, imports coming from N. Africa

Overcapacity prevails in the cut and bend industry in the EU. But instead of slimming down, market players bid for every deal even if they speculate on a price drop of €100/mt. The behaviour of a few players is pulling the whole market down and still leaves no room for producers to increase prices. There are imports of wire rods coming to Europe, but instead of Asia they are now arriving from North African countries like Algeria, Egypt and Tunisia. The volumes are enough to keep the market prices suppressed. At the same time, however, the EU import quotas are in general not approaching anything like maximum utilization.

Situation in North America quickly becomes positive

The situation in North America has become positive very quickly and business in the US market is stable. Most of the sales are closed by domestic mills, due to the very competitive prices offered, and also as almost all new infrastructure projects have a “Buy America” clause. Steel mills have had an uptick in orders at somewhat higher prices, which have mostly been driven by scrap price increases. Turkish buying ahead of the January buy-week helped drive up scrap prices in the US. US ports are still congested, making imports even more cumbersome. Whether real hard consumption will also provide support is an open question. The mills in the US are saying that infrastructure consumption increases are yet to come, starting in the second half of the year.  Imports are priced at levels which do not support a switch from domestic products to imports, while lead times are also “normal” for domestic materials.

Question mark remains over demand in Latin America amid political instability

Elsewhere in the Americas, in general the good news is fewer aggressive offers from Southeast Asia for all products. Meanwhile, there is still a big question mark over demand in Latin America due to the political instability in several countries in the region. Some traditionally non-exporting countries in Latin America have started to look to the international market in the past few months.

All Turkish mills are struggling to export

Currently, all mills in Turkey are struggling to export. Strong competition from Egypt, Algeria, Tunisia, Malaysia and Indonesia and offers heard from GCC countries are making it very difficult for Turkish mills to export. Of course, on top of all that, protectionist measures such as quotas, Section 232, normal values and AD/CVD rates make exports almost impossible. Increased energy costs and higher scrap prices are also putting pressure on prices and make it difficult for Turkey to compete.

Devastating earthquakes in Turkey and Syria also hit steel sector in Iskenderun

Devastating earthquakes hit southeastern Turkey and northern Syria on February 6. The fire which damaged Iskenderun port will hamper trade from the region. Following the natural disaster, market players will have to wait and see, but in the very short term mills in the Iskenderun area are not receiving energy for their production activities.

Raw material and scrap prices rise after New Year holiday, demand rebounds strongly

Raw material costs are very high and scrap prices rose unexpectedly after the New Year holiday. Another important factor is that scrap prices in Russia went up and for the first time in a long while Russian mills are not aggressive in exports. January indeed saw a strong demand rebound for raw materials. This was led primarily by China, which dramatically removed its remaining Covid restrictions and also stimulated its economy.

Stronger production rates in January as recession seems to have been avoided

While the markets had been optimizing for recession with low inventories and lower production rates towards the end of last year, January saw stronger production rates as an energy-induced recession seemed to have been avoided. Energy prices fell as well as logistics costs. Buying activity was much stronger as inventories were depleted and had to be reprogrammed for stronger production rates. Both of these factors on top of decent demand levels contributed to rebounding raw material prices. Europe looks much better than previously expected. Also, energy in storage is at high levels, while the weather has been fairly mild.

Temporary absence of Chinese export offers amid local market improvement

China is back from its New Year holidays, and so there is some activity. The small signs of an improvement in the Chinese market have led to a temporary absence of its offers from the international market. Furthermore, energy and logistics costs have declined a little, providing some relief to many players in the market.

German and European domestic prices equal to or lower than import prices

In Europe, German domestic and other European prices are lower or equal to import prices. Imports are almost at a standstill as can be seen from the utilization of quotas. As there are almost no imports, this leaves room for domestic mills to raise their prices as soon as seasonal demand picks up.

Competition again becomes more regional

Following the aggressive presence of Asian countries in export markets at the end of 2022, it is reasonable to say that competition has once again become more regional. However, there is still strong competition for Turkish producers as there are not many places where they can sell their products.

Current status of market still unstable and fluctuating

The current status of the market is still unstable and fluctuating. No one can predict the level of raw material and energy costs going forward this year. Plans may change instantly.

EU’s CBAM to start to have an impact later this year

Another aspect which importers in to the EU market must face shortly is the EU’s Carbon Border Adjustment Mechanism (CBAM). Although there is still some time before it will be a real cost factor, the bureaucratic hurdles will start in October this year.

Market outlook remains unpredictable and challenging

Under the above circumstances, the outlook for the global steel long products market is unpredictable and challenging, though everything points out to a market turn any time soon, at least in the EU.

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Raw material costs are increasing once again and energy prices are expected to be very high at least until March 2023. Mills are facing cost pressures once more in the global long steel products market. Business activity has been reduced during the past month and, even though scrap and iron ore prices have gone up, net margins have either at best kept pace or in some cases narrowed. In this overall context, the first quarter of 2023 could be a very difficult one for the global long products market, even the worst quarter in a long time.

Mills will be forced to cut outputs further to avoid incurring losses

It looks like some mills are trying not to reduce their outputs too much or only as much as necessary as they will be finishing this year with positive results due to the good performance recorded in the first half of the year. However, the situation will probably be a lot different next year and they will be forced to reduce outputs further in order to minimize losses on their balance sheets. Another reason is that, if they continue to maintain their production levels and sell at a loss, it is very likely that they will face trade measures. In these circumstances, it will take some more time for a new supply-demand balance to be seen in the market.

Uncertainly prevails in EU market over supply and energy costs, imports an option

The gap between domestic and import prices has shrunk so much in the European market that more and more mills have bought domestic, respectively inner EU material in small volumes as uncertainty prevails. Steel buyers in the EU market have started to become nervous about what will happen after the holidays, as the anticipated longer revamps by mills will very likely limit supply. On the other hand, there is a big question mark over the weather conditions in the first quarter of next year. If temperatures remain mild, then demand for construction, which has been healthy so far, will pick up earlier and help mills to raise their prices. However, there is also uncertainty in relation to energy prices, which places a question mark over everything within the EU.

Economies doing better than expected, Buy American package in US could stir up trade battle

After the shock of the war in Ukraine and of energy price hikes, the markets seem to have digested the interruptions of logistic chains and economies look better than expected. The general outlook for 2023 is also better now. That said, in the US the new Buy American investment package will be in force from January 1 and it will be a huge challenge for the EU. A new trade battle could be in the offing.

Possible new official stance on Covid in China could boost steel demand

Covid-19 seems to be under control everywhere except in China. There are some signs that China may quietly dismantle its zero-Covid policy after the Chinese New Year holiday in January. This will hopefully lead to an increase in demand for all steel products.

Softer approach to interest rates could also have a positive impact on steel demand

December is a short month, and there is pent-up insecurity on what energy costs will be like in January, or even tomorrow. On the other hand, we understand governments are concerned about markets and so they talk more softly about interest rate increases and the central banks also appear to be easing off on the issue of interest rates. This may also have a positive impact on demand.

Competition becomes fiercer and increasingly regionalized

Competition in the market is very difficult and fierce wherever allowed. Otherwise, it is more and more regional as markets are increasingly protected. Domestic mills compete with each other and with possible imports. Volume chasing by domestic mills is very detrimental, leading to even lower prices, without the increase in additional volumes.

Outlook for the current unstable market is very challenging and unpredictable

Under these circumstances, the current status of the market can be described as highly unstable and unpredictable. The outlook is also very challenging and unpredictable. The outlook for the first quarter of 2023 is negative and it could be the worst quarter in a long time. The situation is certainly tough, but with the end in sight.

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Demand in the global long steel products market is either very low or there is no demand at all, depending on the region. Overall demand is less than real supply and possible supply increases. The demand for ferrous materials has also slowed down considerably as industrial outlooks have lost visibility. Energy cost uncertainty and the destruction of demand have led to order cancellations. Demand is not expected to improve in the coming months and therefore operating under current conditions is not sustainable for the steel industry. More closures will follow in the coming months especially for those who also suffer from the consequences of the war in Ukraine.

Chinese traders start to short the market

Customers are delaying purchase decisions while Chinese traders are shorting the market. Steel mills are in trouble and even those in Asia are entering the red zone. Energy prices have been softening thanks to the warm weather but may go through the roof again at any moment.

Private sector construction activity in EU almost completely dried up

Private sector construction activity has almost dried up completely in the EU market, which places small and medium-size cut and benders in real difficulty. Industrial and public projects are still available in good volumes, but everyone is fighting for them now and undercutting prices to an extent we saw at the beginning of the pandemic when some market participants believed prices would fall through the floor.

EU mills doing everything to maintain prices at certain levels

However, domestic mills in the EU are doing everything to maintain prices at a certain level and, even if they have reduced sales prices a lot in the last couple of weeks, their clear aim is “profit before volume”. The uncertain situation for mills in relation to gas and electricity bills remains unpredictable, which makes it difficult to push prices down. However, more pressure is coming from imports. Demand for construction, on the whole, is still good in Europe. At least in Germany, demand is still good despite the pressure on prices. Those who have full order books are in a good situation and can sit and wait if they have covered their needs.

US market outlook becomes more unknown and negative, mills still see record profits

In line with the general international market, the US market has also changed to a more unknown and negative outlook. With the expectation of raw material prices coming down, there is an expectation that all pricing will undergo a correction. With this expectation and the approach of the end of the year, most service centers are reluctant to replenish their inventories. The steady rise of interest rates also increases the expectation for a slowdown in the economy and in future construction, especially housing and commercial construction. Although all pre-financed projects are keeping demand high, the future is more uncertain, especially after the mid-term elections in early November. Unemployment is still very low, making it difficult to find qualified workers both at warehouses and ports. Ports are still very congested, making cargo movements even more difficult. Protectionism is on the rise even with this administration, with so many roadblocks at every step to discourage imports. In spite of all such negative developments, the US mills are still turning in record profits, even though the July-September quarter showed less earnings.

International market under pressure from very aggressive prices from Asia

In general, market prices are under pressure from Far East and Southeast Asian mills who are being very aggressive. The GCC countries are also offering very low prices which makes it impossible for Turkish producers to compete in the long products market. Even the Turkish market has become a battlefield for some exporting countries like Russia, India and China for some other products. The coming holiday season will probably make things worse. Turkey has been squeezed between low-priced semi-finished steel products and a stronger India than normal. In China, iron ore prices have fallen to two-year lows amid renewed fears of more Covid lock-downs.

Freight rates become more predictable – a positive development  

Freight rates are becoming more predictable, which may be considered as more good news for the market. Logistic costs are slowly moving towards “normal” but are still at high levels. At least the availability of vessels, barges and trucks is better now.

India still shows strong appetite for raw materials

Moreover, lower ferrous scrap flows have mitigated demand cuts to some extent. India has also had a strong appetite for raw materials for some time and this is expected to also continue well into 2023.

Competition still very high, except for US and EU which remain protected

There are still different global markets from the point of view of competition. The US and the EU are protected and not part of the competition in the global market. Competition is very high elsewhere, particularly in the Middle Eastern and Far Eastern markets. China has been more and more aggressive lately and offers of semi-finished products out of the Gulf region are very competitive. Freight rates are the only factor limiting competition in faraway markets.

Current market situation and next quarter outlook both unstable and negative

Under such circumstances, the current situation in the global long products market may be described as unstable, while more negative news continues to come from Russia’s war in Ukraine. The outlook for the next quarter is also unstable and negative. The January-March period may be worse than the height of the pandemic, driven by lower prices in Asia and continuing impacts from the ongoing war in Ukraine.

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It has become very complicated nowadays to use the word global when talking about the global long steel products market. It seems like there are different globes. Demand has disappeared almost everywhere and commodity prices are down, which definitely forces mills to slow down. The main issue for steel producers is volume and profitability. Adding salt to the wound, July and August are usually the most difficult months for increasing prices and maintaining volumes.

Chinese mills barely making money, ex-Russia supply creates great difficulties for Turkish mills

Steel mills in China are barely making money, while volumes are being suppressed both politically and by business decisions. Trade barriers into the EU, UK and US markets still exist, and supply from Russia is causing big trouble for Turkish mills.

Risks of Q4 energy shortages give some support for demand in EU

Demand has rebounded in the EU amid the risk of energy shortages in the fourth quarter of 2022 and is higher than usual in the holiday season. Of course, it must be seen how long this situation will continue. In fact, demand for long products as well as prices in the EU are probably higher than anywhere else, but the safeguard measures prevent imports of steel which are so necessary, especially these days. Other areas in the world have a big cost advantage as steel products are much lower in price and are giving benefit also to downstream industry and investors.

Domestic mills dominate market in the US with their faster deliveries

Demand in the US market is the same, but with fast changing raw material prices causing HRC prices to come down. Others have started to follow. The reinforcing bar market is holding its ground somewhat but is expected to come down as well. With the expectation that all prices will come down, future sales have become impossible, which is basically what imports are all about. Finally, after a sharp drop, by early July, import cost prices started to go up in parallel with scrap prices. In short, the US has become an even more difficult market for imports. Naturally, domestic mills with faster deliveries dominate the market.

Rebound in scrap prices sends a positive signal

Scrap has rebounded from very low levels, sending a positive signal to the market. However, the market is still very quiet.

Low inventories boost mills’ hopes for Q4, prices start to move to more sustainable levels

The low inventory levels in the market keep steel mills’ hopes alive for the fourth quarter, in addition to the news that Russian mills have reduced their export volumes due to their very strong local currency. Prices have started to move from very low and unhealthy levels to more sustainable levels.

Competition is either non-existent or very difficult, market can be described as unstable

The competition in the market is either non-existent or very difficult depending on where you are. There are a lot of challenges in the market and September is fast approaching with great uncertainty. Under these circumstances, the global long steel market can be described as unstable.

Outlook is unsatisfactory, but buyers to replenish stocks at end of August or start of September

The outlook may also be described as unsatisfactory. However, given the very low stock levels and hand-to-mouth sales, buyers will have to replenish stocks at some point, most probably at the end of August or the beginning of September.

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At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that the war in Ukraine has changed sentiment in the global long steel products market as well as fundamentally altering the flow of raw materials and finished products almost overnight, adding that the market is currently distorted.

The IREPAS chairman said the situation has created many new opportunities, but also major imbalances. He went on to explain that lately some oversupply has been observed here and there in the global long steel products market and added that Russian ferrous materials have been trading at a steep discount to other suppliers, with fewer destinations available.

On the last day of the conference, producers of long steel products, as well as traders and raw material suppliers, shared the conclusions reached at their special committee meetings regarding the current situation in the markets with the general participants at the event.

Raw Material Suppliers at IREPAS: A lot of challenges going forward, downside risks remain

Jens Björkman, chairman of the raw material suppliers committee, listed the factors affecting the steel and raw materials markets recently such as the pandemic, the semi-conductor shortage, the war in Ukraine, the shortages of raw materials and components, high inflation rates, monetary tightening and the impact of the zero-covid policy in China on growth, which have all contributed to a really shaky period, he noted. High inflationary pressure is also forcing the industry to slow down, while the idling of some plants is expected in the coming months at some steel-using producers, signaling negative developments in terms of demand. Mr. Björkman said that there are still pockets of supply shortages in the automotive sector, where production is not in line with demand, since, while demand is strong, production remains slow because of component shortages, and this in turn leads to a deficit in scrap generation. All of these factors indicate that there are a lot of challenges going forward, the committee chairman underlined.

“For the past year and a half, we have been trading at around $400s/mt. However, in the last two months we have seen price movements that we haven’t seen since 2008, amid trade distortion and the impact of the war on actual trade. We have seen $200/mt decreases because prices first increased by as much, though it is a short-term effect,” he said. The raw material suppliers committee indicated that it expects that the market will stay at these levels for a while as the current price levels are considered tradable, with a little downside risk amid the oversupply of scrap.

Looking at the EU, Mr. Björkman said that the region is under pressure from energy costs, while there are also a lot of investment activities in the EU, either to shift production to electric arc furnaces from blast furnaces and in greenfield investments for green steel. He went on to say that building new electric arc furnaces is also going on in North America and Turkey, and these markets which are undergoing backward integration will need to secure raw materials.

Regarding the financing of the trading of scrap and other raw materials, the chairman of the IREPAS raw material suppliers committee indicated that financing has been under pressure in the recent period when prices have been very strong, and insurance companies have not been willing to take added risks. He further stated that, with commodity prices doubling, companies have not been able to insure trade goods, while the banking system has become very sensitive in relation to sanctions and is more hesitant as regards the metals trade.

Commenting on the pig iron shortage, Björkman said that the shortage remains but pointed out that India has introduced an export duty on pig iron and that demand has slowed down in China due to its zero-covid policy, while at the moment the effect of the pig iron shortage on scrap prices has eased. He added that India has also imposed export duty on iron ore, but, since India’s iron ore exports are not significant, this will not have a massive effect on iron ore availability in export markets, although it will support domestic supply in the country.

Traders at IREPAS: Globalization has taken a big hit, things will never be the same

F. D. Baysal, chairman of the traders committee, said that regionalization, in other words protectionism, started with the Trump era in the US, followed by the EU decision to impose steel quotas. Later, this movement continued in a new dimension with Covid when producers realized that they should have inventories ready because of possible unforeseen interruptions, and also the supply chain issues which started with the pandemic escalated with ports being congested and many products arriving at the same time, he noted. “Ukraine was really a major addition to these problems and took the whole thing to another level, with EU manufacturers depending on Russian and Ukrainian supplies for their production. Globalization has taken a big hit and things will never be the same,” Mr. Baysal said.

Commenting on the effects of the war, the traders committee chairman said that initially in the first two months everybody panicked and that is why prices were jacked up, but later, especially after Russian steel products and billet started to reach markets that do not recognize the sanctions, the rise in prices eased. “I think sanctions will increase, but not before the year-end. Circumventing US measures is not possible as there are serious precautions, and it is the same for EU measures as well. However, payments are facilitated through intermediary countries like Switzerland and Dubai,” he stated. Baysal went on to say that unevenly applied sanctions create certain advantages for the countries which do not recognize the sanctions. “I don’t think there is an absolute winner, but countries that don’t recognize the sanctions have the upper hand, though for a short time,” he added.

“Higher freight rates and congestion, especially in the US, is a significant factor in higher steel prices. Congestion will ease slowly. It may take six months to a year and freight rates really have to ease as well. Container prices have doubled, even quadrupled. It is not sustainable. Container lines deliberately pulled old containers out of circulation, causing shortages. Others will come in and produce containers. The situation will change soon. There will also be more ships being built and that will change the whole equation, but it will take time, so higher prices are here to stay,” he explained regarding freight costs.

Producers at IREPAS: Outlook is positive, good days are ahead

Murat Cebecioglu, chairman of IREPAS, mentioned two major problems facing the long steel market, mainly the war in Ukraine and China’s zero-covid policy, adding that the problem in China will probably be resolved quicker than the war in Ukraine, giving breathing space for all. He said that the war had shifted all fundamentals: the supply-demand balance has been broken, supply chains disrupted, prices have increased, there was panic buying in the EU and some countries bought more than they needed.

Talking about certain countries in particular, Mr. Cebecioglu said that peace talks are in progress in Yemen, one of the top three export markets for Turkey. If they bring results, demand will pick up in this market, while in the Philippines, after the formation of the new cabinet, things are expected to be much better. Looking at the Middle East, the UAE produces more than it consumes, so it exports to many countries. In the GCC region, countries that used to be importers have now become exporters, such as Oman which is exporting to the EU in good quantities. When it comes to Turkey, he underlined that it exports to many countries and the war “gave some small chance to Turkey as it is the only alternative” in the absence of Russia and Ukraine. Although exports to Southeast Asia have not been possible for Turkey this year because of China’s presence there, Turkey got the opportunity to replace the supply from Ukraine and Russia, though it was also negatively affected itself, since these two countries are major suppliers. He also pointed out that, with the EU redistributing the quotas of Russia and Belarus to other countries, Turkey’s volumes for the EU have increased.

Commenting on whether Turkey is becoming less competitive in the face of Section 232 measures being replaced with quotas for the EU, the UK and Japan, the IREPAS chairman explained that the US has always been a good market for Turkey, though it had not been possible to sell to this market for the last couple of months as prices were so high at around $900/mt, “but today it is quite possible and deals have already been made with the US. These countries are not an obstacle for us. Selling to the US is always about pricing,” he added. As for the current situation regarding Turkey’s long steel exports, Cebecioglu said that, as the local markets slowed down in most countries, along with increasing prices, Turkish suppliers have a hard time foreseeing the future. He explained that Israel, one of the top three export markets for Turkish long products, has not bought anything for more than a month or so, but now they are coming back to the market, the same as Yemen. “We are in the clear, I think. In the coming weeks, things will be alright,” he affirmed.

Regarding freight rates and shipping costs, the producers committee chairman indicated that freight rates have more than doubled and vessels are waiting a minimum of three to four weeks at ports, resulting in “a huge effect on the steel trade using bulk vessels. When you look at the Baltic Dry Index, it seems more or less the same as last year but China’s Covid restrictions have blocked many ships out of business, creating a big problem, and I don’t know how soon this can be resolved,” he added.

Some oversupply is observed here and there in the global long steel products market. The market situation is getting worse. In particular, there is a vacuum in Western markets due to the war in Ukraine. Price hikes were very rapid and very steep, which could be a reason. Energy prices have negatively impacted manufacturing, especially in Europe. Inflation is another factor which has also been having a negative impact on consumption, though it is still difficult to comprehend why the market has been so silent during recent weeks and to understand what has been causing prices of scrap to drop by such significant margins.

Reinforcing bar mills in EU in good position to keep prices at high levels

Reinforcing bar mills in the EU are in a good position to maintain their prices at high levels despite lower demand and internationally weakening prices, as Turkish and Algerian imports have been out of the market since quotas expired as of early April.

Lack of clarity in EU on lifting of safeguards or quota increases for some products

There is still no signal from Brussels regarding the lifting of safeguards or increases in quota volumes for certain products. Hence, offers are expected to stay tight. Brussels is responsible for the detrimental usage of the “all other countries” quota in April because of the strange handling of the Russian and Belorussian quotas.

Scrap price premium shrinks in April influenced by Russian semis supplies

The pricing premium on ferrous scrap, which was an effect of the Russian invasion of Ukraine, deteriorated during April as Russian semi-finished products have been able to find destinations in Asia and Turkey via trading intermediaries. Russian ferrous materials trade at a steep discount to other suppliers, with fewer destinations available. The March war premium was lost in April despite the war continuing and despite continued disruptions amid the ongoing brutality of the invasion.

Intra-European trade at good levels

Demand remains good in intra-European trade where supply in the long product market is insufficient compared to demand.

Strong dollar puts pressure on commodity and ferrous metals sectors

In uncertain times, a safe heaven is provided by the US dollar, which has been trading at a five-year high against the euro. This has been putting pressure on the commodity and ferrous metals sectors as well.

Chinese lockdowns put pressure on global raw material prices

There has been a slowdown in China due to the Covid lockdowns and property developers still being in trouble after the Evergrande crisis. The majority of the Chinese population is still affected by lockdowns due to China’s zero Covid strategy. The lockdowns have also had a negative impact on demand and prices, with global raw material prices coming under pressure.

Margins for producers and users still very good, post-Covid situation in West a positive

The margins for producers and users worldwide are still very good, with Ramadan now over and production growth in China still negative. The pandemic is almost over, at least in the Western world. The post-Covid situation in major markets remains a positive, which boosts consumption.

Russian exports disrupt pricing, war in Ukraine contributes to uncertainty

Competition in the global longs market remains very regional due to trade measures. But Russian exports have been causing significant disruptions as far as pricing is concerned. The war in Ukraine and the worldwide uncertainty does not help the markets to resume their normal business mode. The situation is very challenging when trade is very intermittent and so competition is not very intense.

Market situation unstable though outlook satisfactory despite challenges

The current situation in the market can be described as fluctuating and unstable as market demand is intermittent. The outlook, however, is still very good and satisfactory despite being challenging in certain regions.

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Demand is picking up in the global long steel products market after the holidays and it will be even better once the weather becomes warmer in the northern hemisphere. It seems the market is getting back to normal. Section 232 is practically over. General demand is strengthening with the pandemic possibly coming to an end. Bottlenecks seem to be easing somewhat, such as breakbulk freight rates, which have returned to more normal levels. International trade has resumed, bringing confidence to the market. Covid restrictions are being removed. At some point, automakers’ chip shortages will come to an end and this will boost car manufacturing. Market players are looking forward to seeing how raw material prices will settle this week after the Chinese holiday, though the situation so far seems to be positive.

Integrated mills still hold an advantage over their EAF-based counterparts

Steel consumption is still excellent around the world, while the ferrous scrap market has strengthened since the New Year. Input costs for both integrated and EAF-based mills have increased in a similar fashion. However, the advantage still lies with the integrated mills. The relatively high prices for ferrous scrap, along with increasing prices for non-ferrous scrap, are expected to keep the flow of obsolete scrap at elevated levels. Raw material demand is increasing and is expected to drive costs everywhere, along with energy, with EU steel producers contributing significantly to this increasing raw material demand.

Steel producers start announcing green initiatives

Global attention is shifting to steel producers announcing green initiatives, and so now we are all on a three to four-year road to change. Green changes are primarily for local and somewhat regional markets.

Spread between rebar and hot rolled flats mostly returns to historical normal level

The spread between reinforcing bar and hot rolled steel sheet in coil prices is returning to the historical normal level of less than $100/ton in every region, except the US and Canada.

Energy costs remain biggest issue facing producers

Energy is still the biggest issue nowadays facing producers and costs are double compared to the previous year with energy prices reaching all-time record high levels. Costs of raw material will also be another item to deal with. The geopolitical situation is also unstable.

Demand reasonable for EU mills, supported by mild winter weather

Demand is reasonable for EU mills as there are some serious projects in the Mediterranean region. The extremely mild winter in Europe has not interrupted construction yet. All yards are running at 100 percent and mills are nicely booked with orders. Building companies are still trying to push cut and benders down with prices, but the resistance of more and more benders gives hope that bending prices will rise very shortly. Almost every EU market is performing well, and imports are more and more regulated or are not available. Buyers have almost no option. International demand is also either going up or is strong at least, despite the winter season.

Prices soften in US, contrary to global trends

However, the situation is very different in the US from that in the rest of the world. While the rest of the world is experiencing price increases, prices in the US are still softening. Though the US market is coming from much higher prices, the further softening of prices is confusing. Demand is still strong, but the fear of further price reductions keeps distributors from making future commitments. After the EU, the lifting of the Section 232 measures from Japan may not help expectations. However, if the reduced quotas are also applied to Japan as was done in the case of the EU, the effect may be minimal. The US-EU agreement on the removal of tariffs has strengthened EU demand, though it has been a slight negative for US producers during the past month. Expectations in the US are for price stabilization soon and slow price increases to follow due to the inevitable high inflation with low interest rates.

China to produce less steel in 2022, good news for other producers

China has stopped increasing steel production and Beijing’s policy is to produce 100-150 million tons less steel in 2022 than in 2021. Steel demand is still strong in China and exports are not of real interest to them. Chinese steel exports are firmly below six million tons per month. Furthermore, the Chinese government seems to be proposing more infrastructure investments. If China does not produce as much as it did in 2021 and if exports do not increase, then all other suppliers will have the chance to export to Southeast Asian and Far Eastern markets as well. Another major positive is that, if less steel is produced, it will create a mini boom in import demand from mainland China. Also, China’s stimulus in December brought production back in line after the Evergrande debacle, which boosted sentiment.

Levels of competition are reasonable, Turkish mills struggle to compete in Asia

The levels of competition in the market are reasonable. The competition in the reinforcing bar segment is between Asian and Gulf countries as it seems that Turkish mills have difficulty competing at the buying prices seen in Asia.

Outlook very good for an overall strong market

The current status of the market can be described as very stable and strong, perhaps with the only exception of the US for the time being. The outlook is very good and satisfactory.

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Demand is slowing down in the global long steel products market as we have entered the slow season in the northern hemisphere and the holidays are approaching. Market activity may remain slow until the Chinese New Year holidays and so we may see further price erosion in the coming weeks. However, such erosion should be limited due to higher costs of production. There is an energy shortage, and the cost of energy is higher. Moreover, since steel production is already at pre-pandemic levels and since that keeps alloying elements, refractories and electrodes all at high prices, this will be another supporting factor for higher costs of steel compared to the same period last year, preventing any sharp drops in prices of steel. Higher freight rates are also supporting higher steel prices in the international market.

Shift to volumes observed in international and domestic markets

Steel supplied to consumers and customers worldwide in 2021 has been determined by availability and price. Nowadays, there has started to be a shift to volumes in the international market and to a large extent also in domestic markets.

Blast furnaces gain further advantage over EAFs with lower iron ore and coking coal prices

As mentioned, energy costs are increasing everywhere, but coking coal prices have started their retreat. With relatively low iron ore prices and the downward movement of coking coal prices, integrated blast furnace-based producers have gained an even greater advantage over the scrap-fed EAF industry.

Lack of clarity on supply chain logistics adds to uncertainty in some regions

Contract pricing in the EU, South Korea/Japan and North America is still being discussed in a weaker market.  Contract tons, even at very attractive prices, are being returned to producers due to the lack of clarity in relation to supply chain logistics and chip shortages.

Demand also slows in EU, mills to use holiday period to limit supply pressure

Demand is also slowing down in the EU market due to seasonal factors. However, many buyers booked their last orders for the year in the latter part of November. It looks like the EU mills are done for the year and some of them will use the holiday period for revamping and additional extraordinary holidays, which will remove any supply pressure from the market. Imports are not a threat to the EU mills, while on the other hand the tariff quota agreement with the US and respective export options may lift prices further.

Good scrap demand in Europe, winter conditions impact scrap flows

On the ferrous scrap side, European logistics constraints persist. Demand remains good for the remainder of the year. At the same time, winter conditions are hammering scrap flows in areas of Europe. Energy costs have led to temporary outages at producers in Europe.

Hyperinflation in Turkey impacts trade

The hyperinflation in Turkey, which has been fuelled by a loose monetary policy and the subsequent devaluation of the Turkish lira, has slowed domestic consumption, at least temporarily. Ferrous scrap trade has been shaken up by this during the past few weeks.

Lack of increased exports from China provides important support for global market

China is still not increasing its exports of steel, which is an important supporting factor for the global market.

Mills have enough orders for coming months, demand bolstered by stimulus measures

The cycles of buying are getting shorter, i.e., shorter lead times. This takes a bit of the uncertainty out of the market, which should reduce the dislocation of the futures markets from the spot markets. There is plenty of demand and balanced supply should prevent strong volatility in the market. Mills have enough orders for the next couple of months. Stimulus packages and the availability of low-cost money will support demand. Freight rates seem to have peaked for the time being.

Competition becomes stronger worldwide amid limited export options

Competition in the market is getting stronger as there are not many markets left for exports; however, order books are still satisfactory. There are even some Chinese origin offers appearing in the market. Overall, the level of competition depends on the region.

Omicron virus variant raises concerns, US agrees with EU on quotas

The US dollar has strengthened, while fears surrounding the Omicron variant have dealt a blow to the prospects for reopening during the winter months. There may be lower prices and shorter lead times in the market.  The US has already agreed with the EU on quotas. Agreements with Japan and South Korea are expected to be finalized soon. The UK, Norway and Iceland are next in line.

Markets generally stable despite some fluctuations, Q1 outlook mostly stable

The current status of the market is generally stable despite some fluctuations in certain areas. The market is now more volume-driven. The outlook for the first quarter is mostly stable, particularly as no supply pressure is expected.

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There were 223 producer representatives among the 918 registered delegates from a total of 70 different countries. There were also 69 registrations representing 31 different raw material suppliers.

At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that the supply was no longer an issue in the global long steel products market, and demand would be the driving factor from now on, though it would probably be rather slow for a while because prices are normalizing and delivery periods are becoming shorter. He also added that the cost of producing steel is increasing, especially on the energy side.

IREPAS chairman also said the logistics situation is getting worse in terms of constituting a bottleneck. Furthermore, the strong surge in electricity costs, which have tripled or quadrupled since August this year, has tightened the pressure on many mills, meaning they have to seek to pass on cost increases to their customers, he added. Mr. Cebecioglu also said that the outlook for the market in the next quarter is much more positive than it has been seen for some time despite several uncertainties.

Raw Material Suppliers at IREPAS: Scrap demand level is very supportive of the market

Jens Björkman from Stena Metal International, the chairman of the raw material suppliers committee, commented on the performance of the steel market and stated that general conditions are expected to improve amid quite substantial support from governments for a rebound after lockdowns. “We will continue to see markets resuming to more normal circumstances next year. We expect the markets to perform well,” Mr. Björkman noted.

The raw material committee chairman pointed out that China is planning to cap its steel production in the first quarter at lower levels, meaning that demand for raw materials will also remain limited. As a result, demand in China will be slightly lower during the first quarter next year.

Commenting on the scrap market, especially in Turkey, Mr. Björkman said that seasonally the October-November period is normally a very strong production period, with strong prices also. He added that, with continued strong production, the demand level is very supportive of the market. Regarding threats of scrap bans from certain countries and regions, the Stena official commented, “The risks of that happening are pretty mild, as it is such an important trade”.

Answering a question about financing of the raw materials trade, the raw material committee chairman underlined that, in terms of trade finance, such as letters of credit, there is no shortage of financing, while, on the other hand, there are some issues regarding credit insurance when selling material to the EU market or the domestic market. “Credit insurance, i.e., the ability to cover credit with insurance, has been very difficult during the pandemic and also the post-pandemic period. We are seeing some signs that it might get a little bit better as raw material buyers are performing better and are actually delivering very strong quarterly and annual results, which alleviates the situation for insurance. However, in general it has been a slow rebound so far,” Björkman said.

Traders at IREPAS: Prices will not decrease at least until Q2 2022

F. D. Baysal from Seba International, co-chairman of the traders committee, answered questions during a panel discussion. Mr. Baysal said he believed that there is definitely a genuine recovery. He pointed out that steel production slowed down just to adjust to demand, not because the mills were not able to maintain production, but because most mills are run in an automated manner and are capable of working with minimum staff.

Commenting on the outlook for EU imports, the traders committee chairman said that demand for imports in the EU has been strong for some time and will continue, though imports face other limitations: for example, specifically for rebar, homologation and quotas are the limiting factors. “The Turkish rebar quota opening on October 1 got consumed in a single day, with many importers still holding back significant volumes to clear customs as of January 1. Also, significant imports from other developing countries are not realistic, as it takes time to qualify due to homologation procedures which can take up to 15 months,” Mr. Baysal said.

Regarding the recent surges in energy costs worldwide, he pointed out that energy price increases may be permanent, but that the surge seen recently is definitely temporary. He said that in 2008 and 2014 energy prices were even higher than today, but in subsequent years they moved down and even collapsed during the pandemic, resulting in many postponed drillings, production halts, and shutdowns of coal plants. “Going forward, all it takes is for Russia, Saudi Arabia and the US to increase production, and pricing will go back to normal levels again. Obviously, the nations who are importing their energy will be affected the most,” he suggested. He also commented on the situation regarding freight rates and said that the current levels are not a new normal, but they will not go down in the next few months either.

Addressing the issue of the trade talks between the EU and the US, Mr. Baysal said he believed that nothing has changed regarding US trade policy, but things are rather getting worse or staying the same, instead of getting better.

During a discussion on whether China would return to the export markets or otherwise, the traders committee chairman shared with the conference participants a rumored report that the Chinese government is mulling an export tax on steel starting from January 1 next year.

Finally, Baysal commented on current steel price levels and on whether they are here to stay: “Yes, prices will not decrease any time soon, at least not until the second quarter of 2022. Scrap prices decreased a little last month, but shipping prices continued to double or even triple, keeping steel prices at the same levels. High energy costs will continue to negatively affect steel prices. If China continues to decrease production and stay away from the export market, high steel prices may continue for a long while yet. However, in the long run, I think neither shipping prices nor raw material prices will stay this high.”

Producers at IREPAS: Markets have never been better, great time to be in steel business

Michael Setterdahl, from GFG Alliance – Liberty Steel Mills, member of the producers committee, said that it is a great time to be in the steel business.

He went on to say that the markets have never been better and that the first quarter of 2022 will be excellent, as long as China does not start increasing exports, while pointing out that steel consumption is growing at a higher rate in the rest of the world than in China.

Considering that the extra increases in steel production costs amount to €120/mt, Mr. Setterdahl indicated that, in the medium term, there will be CO2 charges or taxes and that there will be surcharges on all products. He said that right now, steel has surcharges on ferroalloys, but there has been very little reference to natural gas or electricity in the pricing of steel. Commenting on energy costs on the other hand, the Liberty official underlined that the EU and emerging markets will be affected the most because they are importing energy. He also noted that increases in electricity from wind power and solar power are expected, but these will be incremental increases, not immediate as in the case of coal energy.

According to Mr. Setterdahl, demand in China is slowing down, with the Chinese demand growth forecast dropping from 6.5 percent to 4.9 percent. “As inventory levels are going up and as Chinese regulators are concerned about the increase in prices for residential buildings amid expensive rebar and cement, I think there is a political push in China to reduce demand,” Setterdahl noted. In response to a question on whether China would resume exports, he said that Chinese mills may want to turn to the export markets to maintain their volumes with domestic consumption slowing down, but Beijing will not allow mass exports, he noted, explaining that 20 million mt of steel exports out of China may be tolerated but, if the figure goes up to the maximum amount of 65 million mt registered a few year ago, Beijing will take action.