There have been no signs of improvement in the global long steel products market. On the contrary, the current business environment has, unfortunately, deteriorated rather than improved in terms of the supply and demand balance. The wars, particularly in Iran and Ukraine, have significantly exacerbated existing disruptions across global supply chains. What we have seen looks more like a supply-side shock than a demand recovery: higher energy, electricity and freight costs have pushed prices upward, and these increases have so far been widely accepted by customers as inevitable.

Many economies would enter recessionary territory if ceasefire in Iran war fails to hold

So much will depend on whether the ceasefire just announced in the Iran war will hold. If it does not hold and should energy prices remain elevated, there would a substantial risk that many economies will enter recessionary territory, with wide-ranging and potentially severe consequences. Transportation costs have already risen considerably, while uncertainty surrounding future demand has increased across all major markets. At the same time, there is a noticeable shift toward greater protectionism, further complicating international trade dynamics.

US scrap export volumes decline, UK shifts to containerized scrap exports to Turkey

US ferrous scrap export volumes are in decline due to more domestic consumption and difficult prices in Asian markets, while the UK is shifting to containerized exports to Turkey.

On the bright side, increased pre-ordering and restocking activity observed

Despite the prevailing challenges, there are some positive aspects in the global market. Heightened uncertainty is prompting contractors involved in confirmed construction projects to secure supply in advance, leading to increased pre-ordering in order to mitigate the risk of further cost escalations. Additionally, in an inflationary environment, apparent demand often exceeds actual demand, as businesses tend to build up inventories as a precautionary measure. This dynamic is likely to result in a degree of restocking activity, providing short-term support to market demand.

Three distinct regional dynamics seen in competition in global market

Three distinct regional market dynamics can be identified in terms of the level of competition in the global market, which remains high, though it varies across regions. Broadly speaking, in the United States, competition is largely domestic, with local producers competing primarily within the internal market. In the European Union, the landscape is more mixed, characterized by intense domestic competition alongside a limited presence of imports from third countries. In contrast, in the rest of the world, competition is significantly more intense, with global players actively competing across multiple markets.

Rising costs of energy exerting pressure across the industry

At the same time, rising energy costs – particularly impacting steel producers – along with increasing scrap prices driven by higher oil and transportation costs, have exerted additional pressure across the industry. These factors are contributing to heightened competition globally, as producers strive to maintain margins and market share in an increasingly challenging cost environment. The market has accepted cost-driven price increases up to a certain degree. The uncertainty is in the second-order consequences. As with any supply-side shock, the market may have to rebuild around new supply routes, new energy costs and changing raw material availability, and it is still too early to judge how the wider economy will react. It will be necessary to wait and see what impact the ceasefire in the Iran war – provided it holds – will have on easing the surges in costs and if it will bring about a badly-needed return to something approaching normality for business and trade.

Current market environment very unstable, dependent on US war-related policy decisions

The current market environment can be best described as highly unstable and deeply influenced by geopolitical developments. In particular, the global economy has been increasingly dependent on policy decisions made by the United States administration in relation to the war against Iran, though some hope is now offered by the implementation of the ceasefire. Recent developments have intensified market volatility, with rising energy prices, supply chain disruptions and inflationary pressures creating a highly uncertain outlook.  In this context, market conditions remain fragile and unpredictable, with future stability largely contingent on geopolitical outcomes and policy direction in the coming months.

Outlook for next quarter remains uncertain

The outlook for the next quarter remains uncertain, primarily due to the geopolitical tensions in the Middle East. Market direction will largely depend on how the situation evolves in the near term.

If the ceasefire holds…

Should the ceasefire hold, an improvement in demand can be expected, leading to a more positive outlook and gradual market stabilization. However, were the ceasefire to break down and war to be renewed, the risk of a significant economic slowdown will increase. In such a scenario, many economies could enter recessionary conditions, with potential project delays or cancellations and an overall challenging business environment. Other than the military-industrial complex, all other industrial sectors would be negatively affected.

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Due the war in the Middle East, levels of uncertainty have surged in the global long steel products market. Energy prices are flying high, supply chains have been disrupted, bunker oil and freight rates are up and stocks are down. It is too early to predict the overall impact of the war. While concerns regarding deliveries of cargoes originating from regions in the East have helped push prices up in the Western markets, demand is not improving, which comes as no surprise especially when we have no clue about how long this war will continue or to what extent it might spread. Another major question is what will happen to scrap prices.

Investments to be put on hold, no panic purchases despite EU mills’ price hikes

Investments will be put on hold given the high levels of uncertainty all around. EU mills have reacted with price increases but, as the market is still waking up after the winter season, this has not resulted in panic purchases.

Imports into EU risky amid lack of regulatory clarity

Brussels’ incompetence or unwillingness to announce final CBAM regulations and how safeguard measures will be continued after June 2026 makes imports into the EU extremely risky.

Turkish mills face slow local and export demand, adjust capacity usage accordingly

In Turkey, construction activity is slow and exports are down by 20 percent compared to the same period last year. Mills are adjusting their production based on the demand they receive.

US Supreme Court gives some breathing space to importers, but new tariffs likely

The Supreme Court decision in the US against Trump’s tariffs gives a partial breather to importers. However, it will probably not be long before new tariffs will be implemented under different names.

Current market status unstable, outlook unpredictable

It is very difficult to talk about competition under the current levels of protectionism, geopolitical issues and uncertainty in the market. Under the current overall market circumstances, the current status of the market can be described as unstable with an unpredictable and unstable outlook.

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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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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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At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that the situation in the global long steel products market is deteriorating as we have entered a rising-cost business cycle, adding that the situation is dramatic and huge uncertainty lies ahead.

The IREPAS chairman said the current crisis is a once-in-a-generation event with mills and consumers facing an unprecedented increase in energy prices, particularly in the EU, but also almost everywhere else. In addition to the energy crisis, there is also a logistics crisis, he said, adding that production cuts are expected soon, which will balance the drop in demand caused by higher interest rates and costs, as well as by shortages of many items.

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: Lower scrap demand prevails in market, except in South Asia

Jens Björkman, the chairman of the raw material suppliers committee, summarized the committee meeting findings stating that energy prices, especially in the EU, were the main topic of the conference. He added that during summer and autumn all-time record high levels were recorded for natural gas and electricity prices. The committee chairman indicated that interest rates have been hiked to tame inflation, pushing the US dollar to an all-time high against other currencies.

Commenting on scrap demand, Mr. Björkman said that US scrap demand had slowed down and that mills there are running at slightly lower capacities, pressuring scrap and iron ore prices, adding that supply of new production scrap which was previously in good shape has been slower. Also, for China, he noted that, despite a significant stimulus, demand for steel and raw materials has been weakening, with the outlook remaining negative. Scrap demand is significantly lower in some parts of the EU, and this has been offset by Southeast Asian demand where energy problems are not so severe. Also, logistics are another issue for the EU market given the all-time low water levels on the Rhine River, as Europe’s river system is an important part of the EU’s scrap exports.

According to the chairman of the IREPAS raw material suppliers committee, the demand situation in Turkey, which has also been struggling with high energy prices, is under pressure from alternatives to scrap such as semi-finished products, which it has been possible to get at lower price levels. Mr. Björkman explained that Turkey is not only buying Russian billet, but also ex-Asia billet, and that the pressure coming from cheaper billet is affecting Turkish mills’ ability to buy scrap. He added that, thanks to the alternative destinations for scrap such as some Asian countries, the pressure on prices in the market which Turkey was able to exert has been mitigated, though these alternative destinations are not likely to become permanent markets, and so Turkey will maintain its role in setting a benchmark in the international scrap market.

Regarding the possibility of a ban on scrap exports by the EU, Björkman said that it is becoming a likelihood and that any potential ban seemed to be targeting non-OECD countries at first, but now OECD countries seem likely to be included as well. The European Parliament will vote on a ban on November 17 and it could come into force in 2026. He added that the scrap tonnage recycled in the EU is too large; even if a few million tons will likely remain in the EU, the rest will need to find other markets.

Traders at IREPAS: Trade routes are changing due to both war and energy crisis

F. D. Baysal, chairman of the traders committee, commented on the changing trade routes for Russian steel after the start of the war in Ukraine, indicating that Russian steel is mostly going to China, Egypt, Taiwan and Turkey, and “to our surprise 3.5 million mt of Russian slab is still going to the EU, to the mills that are Russian-owned”, he added. He went on to talk about energy prices, another topic of heated discussion throughout the conference, pointing out that the EU is affected the most, but even within the EU not every country is affected to the same extent.

According to Mr. Baysal, in Germany the cost of energy stands at $470/MWh, while it is at $200/MWh in Spain, which is similar to Turkey. Although energy prices have risen worldwide, there are countries with serious advantages like the US, an exporter of gas, GCC countries, and also China, since they are getting Russian gas, as he reminded participants.

The committee chairman said that the traders committee does not expect a lot of changes in the EU policy regarding steel import quotas for Turkey, “I don’t think EU mills will allow that,” he added. Mr. Baysal indicated that some suppliers such as North African countries and the UAE are now exporting to the EU and will eventually gain some market share in the region. He stated that the markets for Turkey are limited, Turkish supplies are mainly taken by countries that are not as much affected by the energy crisis like China or India. Apart from this, access to the US market is limited due to Section 232 and to the EU because of the quota.

Regarding steel imports into the US, Baysal said he does not expect a huge increase in imports, as there is not a strong increase in demand, while he added that there are countries that are exempt from Section 232 like Mexico, Canada and the EU, though  EU has a disadvantage in terms of energy.

Answering a question on semi-finished steel imports from Southeast Asia to Turkey and Europe, the traders committee chairman said that he does not think it is going to be permanent, as, when energy costs go back to normal, the EU will buy from its traditional sources. However, he admitted that North African countries such as Egypt and Algeria or GCC countries such as the UAE will gain some market share in the EU and may be able to hold on to it.

Producers at IREPAS: Energy prices and inflation put pressure on production

Murat Cebecioglu, the chairman of IREPAS and of the IREPAS producers committee, informed the participants about the situation in certain countries, stating that many countries have been negatively affected by inflation rates, energy prices and declining steel production, while the US market remains stable, with its imports going down, an increase expected in its rebar consumption amid new infrastructure projects, and more capacity coming from domestic micro mills. He also noted that, in some other countries such as Qatar and Kuwait, the situation seems a bit better with some infrastructure projects planned.

Commenting on declining steel production, Mr. Cebecioglu said production cuts are already seen which will probably balance the drop in demand, though huge uncertainty remains for the next few quarters, also fueled by some political issues, adding that doing business will be extremely difficult not only in the EU, but elsewhere also.

He went on to say that for Turkey energy costs are the main issue causing a reduction in production and uncertainty is not helping mills to make long-term plans.Regarding Turkey’s sales prospects, “Right after the start of the war, Turkey was able to sell huge quantities to the EU, but now the EU has found other sources that are not included in its quota system,” the committee chairman noted. He underlined that, today, with Asian countries such as Malaysia and Indonesia selling to the EU with CFR prices which are lower than Turkey’s FOB prices, “there is no way Turkey can compete”.

Answering a question regarding the disturbance caused in the markets by Russian supplies, Cebecioglu commented that, from 2024, Russian slab and billet will be banned in the EU and Canada’s announcement that it will sanction any imported steel produced from Russian material causes hesitation to use Russian material. He added that Russian exports are disturbing prices in many markets and producers globally are suffering, with only limited markets remaining for sales opportunities.

The situation in the global long steel products market is deteriorating as we have entered a rising-cost business cycle. Inventories are lasting a lot longer than expected due to the lack of demand in the market. The situation is dramatic, to say the least, and huge uncertainty lies ahead in the coming month.

Europe and rest of the world seem to be two different planets

Europe and the rest of the world seem to be two different planets as regards the steel market. European steel mills and consumers face an unprecedented increase in energy prices. In addition to the energy crisis, there is also a logistics crisis. Logistics problems in the EU are bigger than ever. Cargoes cannot be moved due to several issues like dry rivers since June, the lack of truck drivers, etc.

Output cuts in EU expected to balance drop in demand, then mills to hike prices

Everyone expected the so-called “post-holiday price increase” in the European market, but it seems this year will be different. Prices in the EU are high and increasing due to the current geopolitical situation, and production cuts are expected soon. Such production cuts will balance the drop in demand due to higher interest rates and costs, as well as shortages of many items. Then we will expect significant price increases by all EU mills.

Dollar-euro rate makes imports more expensive in EU, energy costs a major issue

Insufficient quotas are not helping to get prices down in the EU and so inflation continues to increase. On top of all these factors, the US dollar-euro exchange rate makes imports more expensive. Availability and costs of energy will be a major issue in the EU and may be a big obstacle for the regional manufacturing industry.

Serious congestion hinders imports at almost all US ports, exacerbated by labor shortages

In the US, demand and supply have not changed much lately. However, competition from imports has become thinner. Imports must deal with serious congestion problems at almost all US ports. In some cases, it takes months to deliver discharged cargoes.  Meanwhile, cargoes get damaged due to constant relocation at ports due to limited space. Decreasing domestic prices along with the disadvantages of Section 232 do not help either. Labor shortages add to all these problems, if not being the cause of some. It is hard to find employees, from truck drivers to office managers, as most prefer to work from home or not at all.

Turkish mills under pressure from hike in energy prices, cheap ex-Russia imports

With the recent hike in power and gas prices in Turkey, the cost of manufacturing there has increased by $40/mt meaning mills will have to pay this amount from their own pocket for all orders booked for September, which was not included in calculations when orders were placed. Inflation will continue to be at current levels because of manufacturing-cost increases. Of course, the other problem for Turkish mills is that offers from Russia are around $100/mt less regardless of the product offered.

At least raw material prices have finally stabilized, for now

Raw material prices have finally stabilized, even if only for a short time. There are still margins in some areas and long product prices are higher than prices of flat products in some markets, which proves that either supply is restricted or demand is good.

More closures anticipated in Europe and elsewhere

However, in general, there are no expectations of price increases until supply meets demand, which may happen towards the end of the year. European steel producers have announced closure after closure. More announcements of closures will escalate in Europe and elsewhere. Obviously, this will raise prices and make importing more interesting on paper, though it remains to be seen whether it is worth the risk because larger closures of other economic activities could be observed as the winter approaches.

EU mills expected to import more semis, Russian exports to remain disruptive worldwide

European mills may import slabs and billets made in countries that are not so affected by the energy crisis in Europe. The question is whether these imports will be allowed in without quotas. But one thing looks certain: Russian exports will disturb prices and harm many producers around the world, especially Turkish mills. Most producers worldwide are suffering from limited market access and high levels of competition, especially from Russia which is searching for any possible new markets, with the price being more or less irrelevant.

Current crisis is a once-in-a-generation event, market is unstable and fluctuating

Under all the above circumstances, the market can be described as unstable and fluctuating. This current crisis is a once-in-a-generation event, and the result of wrong policies in the past, inflation, and customers’ expectations of a recession. However bleak the situation looks now in Europe, the steep drop in demand for gas, the fact that gas storage facilities are now 90 percent full, and the measures that the EU has just announced will hopefully curtail the crisis.

Bleaker and unpredictable outlook for the next quarter

The outlook for the next quarter looks bleaker and is unpredictable. There is huge uncertainty on what October and November will bring for the global long products market. It seems these months will be extremely difficult and December and January could be worse. That said, shutdowns are spreading and the supply-demand equilibrium may be achieved sooner than expected.

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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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