At the opening of the conference, Murat Cebecioglu, chairman of IREPAS emphasized that there is obvious confusion and uncertainty in the global long steel products market triggered by the announcement of new tariffs on steel imports by President Trump as a result of the Section 232 investigation in the US, the subsequent exemptions from these tariffs, and the resulting safeguard investigation announced in the EU. Mr. Cebecioglu added that it has become extremely difficult to make business decisions as the prevailing question in the markets is, “What’s going to happen next?”.

On the last day of the conference, producers of long steel products and steel billets, 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: Chinese scrap exports not a long-term threat

Mr. Jens Björkman, the chairman of the raw material suppliers committee, stated that since 2015 a rebound has been seen in commodities, as well as scrap, mainly driven by China. He added that most scrap suppliers are worried about the growth in Chinese scrap generation and that the shift in Chinese production to electric arc furnaces might not be quick enough to accommodate the rise in scrap supply. According to Mr. Björkman, there will no long-term exports of Chinese scrap, which will be used in the domestic industry as much as possible.

Mr. Björkman indicated that the EU has seen better-than-expected growth, while the US has performed very well with solid domestic market demand amid the Section 232 tariffs. The raw materials committee chairman said that there is still uncertainty in the market on account of protectionism. He said that, as the uncertainty caused by Section 232 is better for the US domestic market, the discussions of the tariff itself boosted domestic demand and steel production in the US even prior to the implementation of the tariff. Accordingly, he expects that the final decision might be delayed until after the June 1 deadline. Regarding the Turkish steel market, Mr. Björkman said that it is characterized by political uncertainty due to the early election, the weaker lira and shorter lead times.

The committee chairman concluded that, if there is a global trade war, then everybody will be a loser, adding that he does not believe the intentions are to start a trade war.

Traders at IREPAS: Chinese exports will be modest, if not absolutely absent

Mr. Wilhelm Alff, the chairman of the traders committee, said that the main topics discussed during the traders committee meeting were the tariffs in the US and the safeguard investigations launched in the EU and also lately in Turkey. He said he thinks that the EU will wait until the final announcement from the US to conclude its own investigation.

The traders committee chairman stated that, despite the 25 percent duty on imports, the US has to import rebar as they are not self-sufficient, though he also pointed out that Turkey, the biggest rebar exporter to the US, is unlikely to gain an exemption from the tariffs.

Regarding the outlook for Chinese exports, basis the reports that China will continue to close down unproductive and illegal plants and will shift production to electric arc furnaces, and that the EAF capacity they are going to build is about 40-50 million mt, while they will be reducing other capacity at the same time at a very similar rate, and there will be a surplus of 20 million mt, Mr. Alff said that while it might sound a lot for the EU, for example, is relatively small for China in terms of overall demand. The traders committee chairman said he thinks that the Chinese have learnt their lesson already, i.e., that the risk of antidumping duty is always there. He said that the Chinese are building new plants for their own consumption, adding that they will not be absolutely absent from the export scene but their contribution will be modest.

Steel Producers at IREPAS: Sentiment for rest of 2018 is very positive

Mr. Murat Cebecioglu, chairman of IREPAS and also of the producers committee, said that at the producers committee meeting everyone agreed that there is demand in the long steel market but also obstacles, adding that the two main worries are what China will do and where this current protectionism will take us. He indicated that sentiment was very positive for the remainder of 2018.

Regarding the Section 232 extension, Mr. Cebecioglu said that there might be some further extensions to the Section 232 deadline in order to see what the other countries are going to do. He added that it is a dangerous game the US is playing, saying that everyone needs clarity. He also pointed out that with the tariffs the US is targeting a capacity utilization of 75 percent, though they will still need to import at this rate.

Mr. Cebecioglu stressed that these trade disputes are not sustainable, stating that they have to end somewhere. According to the IREPAS chairman, if the EU is exempt from the duties after June 1 and rest of the world is not, it will create a problem for Turks as a major exporter. However, he went on to say that, if everyone gets 25 percent, then Turkey will still have a chance to export rebar to the US. He also said that a 25 percent duty rate across the board would be more fair compared to quotas granted for some countries.

Mr. Cebecioglu also commented on the removal of the import duty on Turkish rebar, stating, “We have not seen a real threat at the moment but we know small volumes are coming to Turkey. As of now, there is a safeguard investigation in Turkey. We have to protect what is ours.”

Responding to a question about the graphite electrode shortage, the producers committee chairman said the shortage has been relieved to some extent, though the steel industry needs more and more electrodes due to the new electric arc furnaces being built. He also indicated that the cost of electrodes is rising also because of higher needle coke prices.

19:00 – 22:00                        Welcome cocktail at Hilton Warsaw Hotel and Convention Centre

Day 2: Monday, May 7, 2018

09:00 – 09:15                        Welcome address by Chairman of IREPAS

09:15 – 10:15                         SESSION ONE – Global economic outlook

- Global Economic and Market Developments

Marek Rozkrut Ph.D., EY Poland / Partner, Chief 

10:15 – 10:45                           Networking break

10:45 – 12:30                           SESSION TWO – Critical changes expected in global long steel markets

- Long products market outlook

Jose Angel Rey, Celsa Group / International Commercial Director

• Overview of global construction sector
• Steel and long products consumption
• Rebar markets
• International price situation

- Most recent developments in graphite electrode market as well as future expectations

Dr. Mark Shujun Ma, CIMM Group Co. Ltd. / Chairman & CEO

• Causes of global electrode shortage
• China’s role in electrode shortage and most recent developments in global electrode market
• How is demand trending? And demand in electrode-consuming industries?
• Planned new capacities
• Solution alternatives for the existing shortage
• How can EAF-based plants survive under current conditions?
• Short-term and long-term expectations both on demand and supply side

- Global steel market developments and analysis

Peter F. Marcus, Managing Partner / World Steel Dynamics

12:30 – 14:30                           Networking lunch

14:30 – 16:30                           IREPAS Committee Meetings

• 14:30 – 16:30 IREPAS Producers Committee (by invitation only)
• 14:30 – 16:30 IREPAS Raw Material Suppliers Committee (by invitation only)
• 14:30 – 16:30 IREPAS Traders Committee (open to all attendees)

16:00 – 18:00                            Cocktail Reception

Day 3: Tuesday, May 8, 2018

09:00 – 10:30                           SESSION FOUR – Panel with Committee Chairmen

• IREPAS Producers Committee
• IREPAS Raw Material Suppliers Committee
• IREPAS Traders Committee

A government official said that existing EAF-based steel mills are facing acute shortage of graphite electrodes with global buyers facing difficulties in sourcing the input from China and India graphite electrode exports have increased by around 49 percent during the past eight months. Ensuring supply of the input is in line with the government’s stated policy of promoting EAF steelmaking, envisaging that it will account for an estimated 50 million mt per year of the country’s projected steelmaking capacity of 300 million mt by 2030, up from around 126 million tons at present.

Industry sources pointed out that, given the duopolistic nature of domestic graphite electrode production, it is difficult to increase domestic production. The two Indian manufacturers – Graphite India and HEG Limited – have a combined installed capacity of approximately 180,000 tons per year, controlling about 10 percent of the global graphite electrode market, second only to China.

On the other hand, India’s Directorate General for Anti Dumping and Allied Duties (DGAD) is likely to review the antidumping (AD) duty on this steel making input around end of the current month, a government official said on Friday, February 9. The official said that, against the backdrop of the export tax and the shortage of graphite electrodes faced by domestic electric arc furnace (EAF) operators, it is only logical that the antidumping duty currently in force will be reviewed to ease shortages in the domestic market.

At present, the antidumping duty rate on graphite electrodes ranges between $278.19/mt and $922/mt, depending on the origin of the product. The import protection measure was imposed by the DGAD in 2015 for a period of five years. According to data sourced from the government, Indian imports of graphite electrodes during the April-October period of 2017 amounted to around 2,900 mt. During the January-October period, Indian exports of graphite electrodes were estimated at 64,300 mt.

While the supply and demand balance in the global long steel products market still looks good, the supply side is gearing up. Supply pressure is not expected to create big problems in the short run but may be an issue in the medium term if demand is not able to cope with it. Even Chinese companies have learned that dollars are more important than tonnages. Accordingly, everybody needs to be careful when thinking about adding more tonnes.

Limited supply of Chinese steel is the biggest positive in the global market

GDP is improving worldwide, with the main economies performing quite well. Demand is stable in Europe, and multiple other markets are performing quite well also. That said, the limited supply of Chinese steel is the biggest positive in the global market. China is still holding back and it looks like it will not be back in the export market after the Chinese New Year holiday, which is certainly a very optimistic sign for the market.

Though prices weaken a little in Europe, EU and US drive global consumer optimism

Pricesin the European market have come down a bit due to weakening prices in Turkey and the strengthening of the euro. Nevertheless, the positive mood especially in the EU and US is giving confidence to long steel consumers worldwide.

Strong rebar demand in major consumption areas

As regards the short term, the situation has worsened due to the declines in Chinese steel prices and in scrap prices. However, the prospects in the medium term are brilliant because demand for rebar is strong in the major consumption areas. Hopefully, after the Chinese New Year holiday, the market will move again and scrap prices will rebound, pulling rebar prices up once more.

Wait for Section 232 outcome causes some uncertainty in US market

Demand has been steady in the US with the potential to improve in future months; however, supply in the US is limited. The unknown fate of Section 232 is holding back imports, giving domestic mills the opportunity to increase their prices. This situation may change quickly depending on the results of Section 232.

Reasonable demand and positive sentiment in major Latin American countries

Demand in the major Latin American countries is reasonable, accompanied by positive sentiment in relation to the forecast for 2018. Price adjustments may be seen in the very short term but still not affecting the interesting spread levels. Market prices are expected to trend upwards after the Chinese New Year holiday.

Scrap demand to remain at decent levels in EU and US

The long-awaited correction in ferrous scrap was seen in January despite demand being fairly stable. Decent demand in the steel sector will continue to keep scrap demand at decent levels for the coming month in the European and US markets, since the influx of imports is at subdued levels.

Prices for electrodes to remain challenging

Electric arc furnaces (EAFs) will be faced with challenging prices for electrodes not only in spot trades but also for longer-term contracts as supply restrictions mainly in China reverberate in the global market.The cost difference between blast furnaces and electric arc furnaces will bring scrap prices to reasonable levels.

Depreciation of dollar, oil prices above $65 and unchanged US Fed rates provide support

The weakening of the US dollar, which has depreciated by almost another four percent against the euro compared to one month ago – which means that prices in the EU have appreciated almost by $25/mt just because of exchange rate – continues to ensure that commodity prices are at high levels. Oil prices are above $65 a barrel and the US Federal Reserve has kept interest rates at unchanged levels. These are all positive factors supporting the current atmosphere.

Weaker US dollar and balanced world trade to keep steel and scrap prices elevated

The weaker US dollar coupled with the increased balancing of world trade will likely mean that prices for steel and scrap will maintain somewhat elevated levels as compared with recent years.

Competition is mostly at reasonable levels

Competition in the market is mostly at reasonable levels. However, mills’ margins are sufficient for them to be able to reduce prices to become more competitive if they have to. Currency fluctuations in late January made the environment somewhat challenging and will likely also have trade implications going forward.

Outlook for next quarter is satisfactory

The market can be described as mostly stable and looks set to continue like this, with some exceptions. The outlook for the next quarter is satisfactory.

DO YOU AGREE OR DISAGREE?

PLEASE LEAVE A COMMENT AND SHARE YOUR OPINION WITH US

CVD rates for Chinese producers/exporters were as follows:

• M. Brashem Inc                               : 38%
• Jilin Carbon                                      : 42%
• Nantong Yangzi Carbon                 : 93%
• Henan Sanli Carbon Products       : 185%
• Sichuan Guanghan Shida Carbon : 250%
• All others                                            : 250%

The UK-based exporter UKCG was also subject to a 250 percent CVD rate as it exported graphite electrodes originating from China.

Supply and demand in the global long steel products market remain balanced as exports from China are still not exerting too much pressure on the international market.

Strong demand seen all around the world 

The World Steel Association (worldsteel) has updated its forecast for global steel demand for 2017, forecasting around seven percent growth compared to 2016. Obviously, the main reason for this huge growth is the rise in the official demand figure for China; i.e., +12.4 percent. Such a sharp rise is mainly because the demand previously satisfied by the closed outdated induction furnaces – which were not included in the official figures – is now satisfied by the mainstream steelmakers in China and thus is recorded in the official demand figures for 2017. Nevertheless, demand is strong all around the world and the global capacity utilization rate of 73.5 percent in September is the highest of recent months and years.

Supply has increased in certain areas, shipping has become more expensive

Having that said, prices differ in various regions and markets due to diverse factors. Supply has shown some increase in certain areas and protectionist measures also play an important role in relation to the supply-demand balance. Freight has been very tight over the past month and this has made shipping more expensive.

Local US market weakens despite better GDP growth

The US domestic market is weaker, despite better GDP growth. It is now much harder to import into the US as domestic prices are either similar to or lower than import prices. The preliminary antidumping rates announced against imports of wire rods from certain countries hit the higher-value grades hard, whereas simple grades ex-Turkey received a duty rate of below 10 percent.

Significant price declines seen in Turkey and UAE

On a separate note, domestic billet and rebar price declines of over 10 percent in the space of one month have changed the mood of optimism which had been observed in the Turkish market in early October. Prices in the UAE market have weakened by an even bigger margin.

Signs of a disconnect appear between suppliers and buyers

There seems to be a disconnect appearing between suppliers and buyers who prefer to follow a wait-and-see approach either due to too much inventory or in the hope of lower prices.

International output and demand expected to be strong amid planned output caps in China

So far, mills have been able not only to pass on production cost increases but also to increase their margins. With five million metric tons of steel products per month being exported from China, only half the volume seen in the previous year, and as planned production caps in China during the winter months will further depress exports, we can expect general international production and demand to be strong.

Global ferrous scrap demand to maintain strength as Chinese steel exports diminish

Ferrous scrap has also been characterized by strong demand and will likely see continued solid demand outside of China as Chinese steel exports diminish.

Worldsteel: More steel is not the answer for anyone

Worldsteel has once again reminded its members that more steel is not the answer for anyone. Producers/suppliers are now following prices lower, but slowly.

Regionalization of steel business is driving up local demand levels

Demand is still very good in certain markets, for instance in the EU. The regionalization of the steel business has been driving up local demand levels.

Graphite electrode prices drifting to lower levels but EAF output still to be impacted

Raw material prices are now more in check, and graphite electrode prices are drifting down to lower levels from recent peaks and expected shortages are now estimated at 10 percent instead of at higher numbers. However, the shortage of graphite electrodes is still expected to put a cap on EAF production next year.

Competition still strong depending on region 

Competition in the market is still strong depending on the region, but spreads are one step above the situation that we had some months ago.

Quite satisfactory outlook for global market going forward though US demand raises concerns

The global long products market is stable in general with quite a satisfactory outlook going forward. If the US approves further protectionist measures, this might push scrap prices up again. However, demand has not picked up in the US, which is a concern going forward.

DO YOU AGREE OR DISAGREE?

PLEASE LEAVE A COMMENT AND SHARE YOUR OPINION WITH US

At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, said he believed the outlook for the next quarter is very good as long as there is no surprise from China, despite the last quarter of the year always being very challenging. Mr. Cebecioglu added that the 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.

On the last day of the conference, producers of long steel products and steel billets, 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: Solid increase in scrap demand so far in 2017

Jens Björkman, chairman of the raw material suppliers committee, stated that during 2017 global steel production has shown continued strength, resulting in a solid increase in scrap demand. He added that increased Chinese domestic consumption has helped to reduce steel exports coming from China, contributing to a strong global steel market for most of this year.

Mr. Björkman said that one of the major changes in the market is that China which had long been a net scrap importer started to export scrap despite the 40 percent export duty and became a net exporter as induction furnaces halted production as part of structural reforms in China.

The raw materials committee chairman indicated that the current situation seems very encouraging for the rest of the year for the scrap market, considering that Turkey, a major scrap consumer, has increased its steel production to above 3 million metric tons per month lately. He went on to say that, with the reduction of steel exports from China, EU-based producers have been doing well for the past nine months.

Commenting on scrap pricing in the EU, Mr. Björkman said that the recent build up of scrap supply has put pressure on pricing for the short term, while domestic prices of obsolete scrap in the EU, especially in Germany, are at record high levels. He added that the market will likely see high prices for prime scrap.

Regarding the electrode shortage, Björkman stated that, given the induction furnace closures in China, it will be an interesting year to see how this affects the electric arc furnace-based steel markets.

Traders: Section 232 is a major concern

Michael Setterdahl, representing the traders committee, said that the main concern of the traders is the ongoing Section 232 investigation in the US, though adding that US Commerce Secretary Wilbur Ross has recently announced that the results of the investigation have been delayed until after the planned tax reform.

Commenting on the recent antidumping duties on Turkish rebar, Mr. Setterdahl said that most traders believe that nothing can really replace Turkish suppliers, since they are one of only two markets that can ship 50,000 metric tons of rebar within two months, the other being China.

The traders committee chairman stressed that there is a rebar surplus of one million metric tons in the EU market and this is because of reduced rebar imports from Algeria which used to import 2 million mt of rebar per year. Regarding the increased demand in the Chinese domestic market, he said that this gave Turkish suppliers the opportunity to ship to Southeast Asia.

Mr. Setterdahl also pointed out that the market should be vigilant about the absolute numbers regarding the decreases in China’s imports or exports, rather than about the percentages. He also said that traders are also concerned about China reentering the billet market, adding that the question is when China will resume billet exports, not if it will.

Steel Producers: Market is in much better shape thanks to improved demand

Murat Cebecioglu, chairman of IREPAS and also of the producers committee, said that the global market is in much better shape than in 2016 thanks to improving demand and decreasing pressure from China. He stated that the general sentiment in the market is very positive, with the supply-demand balance helping the steel market to do much better business.

Mr. Cebecioglu pointed out that, amid China’s absence from the export market, Turkish producers were able to ship to the Far East. He also commented on the GCC region, indicating that the export ban in Saudi Arabia has been lifted and so there is a new player in the market.

The committee chairman said that producers do not expect steel prices to go down further; they may soften a little but they are unlikely to decrease much. Although scrap prices are down, he said that this will be offset by the increased cost of electrodes, and so there will be no change in producers’ cost structure. Mr. Cebecioglu said he believes that the electrode shortage is not a short-term problem. He expects it to continue into the first half of 2019. He also warned that if it continues into 2019 it may affect steel production as well.

Commenting on the Section 232 investigation, Cebecioglu said that, even though the results have been delayed until after the planned tax reform, there is still a deadline – the report has to be presented to President Trump and then he will have to approve it within 90 days.

Demand in the global long steel products market is good and steady as reasonable growth is seen to be globally providing support for steel consumption.

Chinese steel exports at 2014 levels playing huge role in global supply-demand balance

Chinese steel exports are down to 2014 levels after having been considerably higher for the past three years. Obviously the reduced supply from China has played a huge role in the prevailing supply-demand balance in the international market.

China’s steel exports down 28% in H1 – only its exports to Latin America and CIS increase

China exported 16 million metric tons less during the first half of 2017 compared to the first half of last year, which means a 28 percent decrease. Only two areas have increased their steel imports from China during this period – Latin America and the CIS. All other markets have imported less. The largest export market for Chinese steel, i.e., South Korea, imported only six percent less during H1-2017 compared to H1-2016, which means all other major markets received a lot less Chinese steel.

New sourcing is now the name of the trading game

As a consequence of the sharp drop in Chinese steel exports, new sourcing is now the name of the trading game in the global market. At the same time, many domestic markets are strong and are keeping more steel at home. Old demand cannot be filled by new sources and supply is restricted by several factors including political process, currency changes, better  “home markets” and increased input costs.

Turkish pricing for scrap reaches 2016-highs

Turkish pricing for scrap has reached 2016-highs in the $320s per metric ton. Demand appetite has strengthened considerably with scrap tonnages booked exceeding last year for both August and September shipments. Strong Turkish demand for scrap persists due to multiple factors: the weak US dollar, lower steel exports from China, solid demand for steel products and strong pricing. The utilization rates of scrap-based steel production have increased.

Supply appears to be on the rise in US long product market

In the US, demand for long steel products is the same but supply seems to be rising. International prices have increased, making it even more difficult for imports to compete with US domestic production.

Section 232 still a concern for future business despite postponement

The announcement of the much-feared Section 232 safeguard measures has been postponed, which is good news for material on the water. However, Section 232 is still is a concern for future business.

Prices exceed $500/mt FOB in global market

Prices in the global market are increasing and supported by both local and export markets, exceeding the $500/mt FOB barrier. This is now true for both Chinese origin reinforcing bars and Turkish origin reinforcing bars, the two major drivers.

Chinese capacity shutdowns the most dramatic physical change since fall of Soviet-led trade block

China continues to shut down capacity. We have to view this as the most dramatic physical change that has occured since the fall of the Soviet-led trade block. Low inventory levels in China are also a major positive factor for the outlook of the market.

US dollar continues to lose strength

The US dollar has continued its weakening trend. This year the US dollar has lost 12 percent against the euro, which is a major driver for commodities. Low interest rates are also helping to boost market activity.

Electrodes can become a major issue if EAF capacity utilization continues to rise

UHP electrodes which last year traded at $2,000/mt are now trading above $10,000/mt. Some spot trades are even concluded at $15,000/mt. This could become a major issue if utilization rates of EAFs continue to rise. Those producers who have secured a steady supply of electrodes will have a significant advantage. Another potential issue is refractories. These issues will limit production in the short run.

Protectionism is helping those who are trading fairly

Protectionism, on the other hand, is helping those who are trading fairly.

Some traditional export markets like the GCC are out of range due to their low prices

The competition in the market is reasonable in some areas but still strong in others due to increased prices, while also some traditional export markets like the GCC are out of selling range due to the much lower prices in such markets.

Second half expected to be competitive in terms of buying

The second half of 2017 will be competitive in terms of buying, which means higher prices unless there are some unforeseen and unexpected developments. Due to the dramatic rise in prices of certain products, some of the usual price differences between product groups have become dislocated, like the prices of wire rods versus reinforcing bar prices.

Chinese blast furnace mills raking in profits despite higher costs

Despite higher coking coal and iron ore prices, Chinese blast furnace mills are raking in profits on the back of higher rolled steel prices.

A few factors which could change the market situation

Having said all the above, if the US administration comes up with some hard safeguard measures under the Section 232 act, then the flow of the resulting additional supply will alter the global market situation again.

In addition, the fact that prices of raw material and steel products have increased significantly also raises concerns regarding a possible correction in the near future.

2017 looks like being a very good year for steel producers

Other than the two last-mentioned concerns, the market seems to be generally stable and satisfactory at the moment. It seems like 2017 will be a very good year for steel producers.

DO YOU AGREE OR DISAGREE?

PLEASE LEAVE A COMMENT AND SHARE YOUR OPINION WITH US