The overall business environment in the global long steel products market remains relatively stable. However, regional differences have become more pronounced than ever. Protectionist measures in the United States, combined with the implementation of CBAM in Europe and the upcoming reduction of EU import quotas, are reshaping trade patterns and market dynamics.

Ongoing conflicts continue to create uncertainty and raise costs

At the same time, the ongoing conflicts in Ukraine and the Middle East continue to create uncertainty, disrupt trade flows and influence supply-demand balances across multiple regions. Higher oil and natural gas prices have increased transportation and production costs, while steel availability from Gulf region suppliers has become extremely limited. Marine insurance costs for cargoes have also risen due to increased geopolitical risks. Expectations that these disruptions will be short-lived have largely disappeared. As a result, many distributors and stockists are holding onto inventories amid concerns about future supply availability and stock replacement costs. Consequently, the market remains highly fragmented, with conditions varying considerably depending on geography.

EU market sees last-minute import buying ahead of new quota system on July 1

In the European Union and in the United Kingdom, the market is now starting to search for a new equilibrium because of the changes in the import regime from July 1. During the past few weeks, some last-minute import buying has been taking place, as buyers and traders try to position themselves before the new quota system enters into effect. After this, market players will have to adjust their strategy to the supply which is actually available in the market. There will still be imports, of course, and there will still be competition, but buyers will have to build their strategies around actual market availability, not around the cheapest theoretical import offer.

Scrap prices remain strong despite weak demand

There is no demand to support the continuing strength of scrap prices, but it seems that prices will stay where they were before the Eid holiday or they may come down by a few dollars to motivate Turkish buyers to resume buying. Deep sea scrap prices for Turkey remain some way above US$400/mt CFR despite weak Turkish rebar sales, while the strong scrap prices provide support for finished product prices. Meanwhile, Turkish mills do not expect much long product demand from the EU because of the new quotas to be introduced shortly in the region. Regional differences will certainly create different results for different regions and producers, especially for those who source scrap from the US and the EU and need to export their products.

Turkey’s production costs may increase, political situation to impact investment

Turkish mills were enjoying cheap energy costs due to the rainfall during the winter season. This will most probably end when temperatures start rising and the country starts using cooling systems. With the political turmoil in the country, investments will slow down, which will also be another factor causing demand for long steel to slacken.

Demand for semis due to Iran’s absence contributes to higher long steel costs

Demand for semis due to Iran’s absence is another factor contributing to increased costs of long products. In this context, Chinese exports of slabs and billets increased to around 900,000 mt in the January-April period this year.

Long steel market in Germany remains very weak

The market in Germany is still very weak. After the shockwave of higher energy prices (the impact of the Iran war) and price increases for all steel products and for logistics, many projects were put on hold. Consequently, cut and bend prices did not move up but are on the way back down. Benders are desperately looking for orders at somehow manageable prices. German and Polish mills have had to adjust prices down as well, otherwise benders do not buy. So, there has been a drop of around €30/mt in prices despite the seasonal improvement which reflects the level of investment in Germany right now. Better prices for benders from imports are practically not available anymore. Reduced quotas, CBAM and high ocean freight rates make business very difficult. New building permits went down by 10-15 percent and industrial projects by 20-30 percent. There is not even any input from the public sector.

Mixed bag of positive and negative factors in US market

In the United States, inflation remains a concern, and expectations for interest rate cuts have largely been pushed back, with higher rates now expected to continue into 2027. This has negatively impacted housing and construction activity, keeping demand relatively subdued. Meanwhile, steel imports remain restricted by the 50 percent Section 232 tariffs, higher freight costs and logistical uncertainties. Reduced import competition continues to support a gradual increase in domestic steel prices despite overall moderate demand. On the other hand, domestic steel prices are moving closer to import parity, which may improve future import opportunities. In addition, inventories remain relatively low, and continued investments in AI infrastructure, energy and industrial projects are providing some support for steel demand. The primary area of growth remains AI infrastructure and data center investments, although this business is largely supplied directly by domestic mills and these big projects are for consumption of reinforcing steel 12-18 months from now. However, these positives are still overshadowed by geopolitical uncertainty, high interest rates and weak construction activity.

Some positive developments in terms of investments

One of the key positives in the marketplace is the substantial level of investment being directed toward infrastructure projects, energy-related developments and data centers, all of which generate significant demand for reinforcing steel products. In addition, many governments in developed economies are increasingly focused on addressing housing affordability challenges. Policies aimed at expanding residential construction could support additional demand for long steel products in the medium term. Another positive factor for certain markets is the implementation of measures designed to protect domestic industries from unfairly priced imports. While these measures support local producers, they also reduce market access opportunities for exporting countries, highlighting the differing impacts across regions. There are areas like the Balkan and Baltic regions where demand is really great and investment in infrastructure is huge.

China’s crude steel output decreases, its iron ore imports increase

China’s crude steel production decreased by 4.1 percent in January-April, but its iron ore imports increased by eight percent to 418 million mt in the same period, and port stocks are close to 160 million mt. This is a very strange situation: steel production is characterized by weakness, but iron ore imports remain strong.

Divergence between open and protected markets

Competition remains extremely intense in international markets that are open to imports. Excess production capacity in several regions continues to put pressure on prices and margins. In contrast, markets that benefit from trade protection measures or restricted import access generally experience more balanced competitive conditions.

Current market status stable and challenging, outlook varies according to region

Under these circumstances, the current status of the market can be described as stable and challenging. While demand remains generally subdued in many regions, market participants have largely adapted to current conditions and no major short-term disruptions are anticipated. The outlook, on the other hand, varies significantly by region. In Europe and the United States, market sentiment is relatively decent, supported by infrastructure spending and protective trade measures. In many other parts of the world, however, the outlook remains difficult to predict.

Supply side will need to be monitored if Middle East crisis is resolved

Even if geopolitical tensions in the Middle East ease, the resulting increase in availability of supply could place additional pressure on already oversupplied open-trade markets. Furthermore, the current interest rate environment continues to weigh on construction activity and investment decisions in several regions.

DO YOU AGREE OR DISAGREE?  

PLEASE LEAVE A COMMENT AND SHARE YOUR OPINION WITH US

In the global long steel products market, there are signs that supply has caught up with demand and that the supply-demand balance is becoming more neutral. The market seems to be getting back to normal in terms of lead times, prices, etc. We are now in a period where things have to get back to normal, which in fact may be different from where it all started. A price range higher than the beginning of the fourth quarter of 2020 will probably be the new normal. On the other hand freight rates are still incredibly high.

…but Section 232 and EU safeguards still in place

The supply-demand balance seems to be back on track, but of course with the caveat that Section 232 is still in force as well as the EU safeguards, which make supply in both places shorter than necessary. The protected markets will continue enjoying their positions until the measures in question are terminated.

Slowdown in Far East a blow to the global longs market

We should also be following the Southeast Asian and Far Eastern markets. The slowdown in the Far East has dealt the market a strong body blow. The Asian markets are making adjustments, but most would say that everyone is happy over there. The Indian and Vietnamese mills are exporting, while new plants in Indonesia as well as the Japanese mills are making historic profits. South Korean mills most likely will do the same. The Russian mills located close to the ports are still paying their export tax and continuing to export.

EU cut and benders face rising stocks

The stocks of the cut and benders in the EU are being filled up more and more and a number of projects are being put on hold or being delayed due to the high prices for all sorts of construction materials including deformed reinforcing bars. The cut and benders are feeling a significant drop in order income and are holding their breaths to see how the EU mills will react to fewer order entries. But with the holidays ending, stronger demand is expected before the winter starts. As a result, no meaningful drop in EU mills’ prices is expected, especially due to the lack of alternatives from imports. Most of the cut and benders have been managing the drastic price increases so far and low-priced projects are fading out.

Supply seems to be catching up with demand in US market also, imports still difficult

Demand in the US is high, but supply seems to be catching up with the demand in this market as well. There are still some shortages, especially on the West Coast.  However, it is difficult for imports to fill the demand shortages due to shipping constraints. With the erratic and historic high shipping prices, most mills prefer to offer on FOB basis. Importers who buy on FOB basis on all occasions are in for a surprise when cargoes are ready to ship. To add to the problem, most ports are full and do not wish to receive more cargoes. Especially for rain-sensitive cargoes, indoor storage space hardly exists. With all these high prices, credit has become an issue for importers. Hardly any buyers have full credit to insure the receivables.

Freight rates out of touch with reality, no one wants to book on FOB basis

Freight is a major factor nowadays. Even for the traditional routes, freight rates have lost touch with reality. Traders have been punished by the high and unpredictable freight costs and are now careful as regards new business. No one wants to book on FOB basis. It is getting more and more difficult to get a quotation, which makes it difficult and/or risky to offer on CFR basis as well. This situation will create short-term downward pressure on prices and long-term shortages in importing countries. Regionalization is the current trend as sea freights are exceptionally high.

China’s steel output restrictions may buoy up steel pricing

China’s restrictions on steel production at 2020 levels will mean stronger Chinese demand for semi-finished steel imports, which should support other regions, especially ASEAN producers. It could also buoy up steel pricing. China’s announcement of production cuts is welcome amid environmental concerns and may support worldwide billet prices, but it may also put further pressure on ferrous scrap prices due to less demand. Most Chinese production is based on iron ore and has already gone down a notch, and so the impact on ferrous scrap may be limited.

Europe impresses with steel production performance in January-July

European steel production strengthened during the first seven months of the year at a stronger pace than production in many other regions. Scrap demand in the intra-European market has been stronger than normal, and this situation seems set to continue for the coming quarter. Semiconductor and component shortages continue to weigh on industry. Supply of higher quality scrap grades and industrial scrap has become tighter.

Coronavirus vaccinations should support demand levels

Although the number of Covid cases is still high and we are again entering the season of colder weather in the northern hemisphere, the post-pandemic rebound and reopening are continuing despite setbacks due to the Delta variant of the coronavirus. The vaccination process will surely allow us to continue with our daily lives and so demand should continue.

Insurance becomes an issue due to increased value of cargoes

Demand is still good and mills are booked for the next few months. Moreover, huge investments are on their way. Payments seem not to be a problem even though insurance is becoming an issue simply because the value of cargoes has reached very high levels.

Future looks promising due to planned infrastructure investments worldwide

Almost all countries are looking at some type of stimulus plan, with infrastructure being high on the list as it is the easy choice. Money is easy to print for the US and the EU, while all others have to borrow at somewhat reduced rates. Stimulus money is still flowing and infrastructure spending in particular looks to continue for several years in the EU/ UK and North America.  Nevertheless, the future looks promising for infrastructure investors. It is also a good time to be melting domestic scrap and selling long products regionally.

Competition starts to normalize

The competition in the market is also expected to get back to normal, with demand reaching pre-pandemic levels. There is strong competition between Turkish long product exports to Asia and Asian-produced material. Otherwise, competition is normal and acceptable. As for the ferrous scrap market, there is regionalization and competition is strong in general,

Overall situation stable in global longs market

Overall, the current situation in the global long steel products market can be defined as stable and perfect to proceed, with some fluctuations here and there.

Satisfactory outlook for next quarter in EU, some price cuts possible in North America

For the most part, there is very little steel to be sold during September, October, November and December. The outlook for the next quarter is satisfactory in the EU, as for the ferrous scrap market. However, some downward adjustments in the North American market may be seen and negativism is bound to spread and may affect other markets. Accordingly, it may be time to wait and see or to proceed with caution in some markets.

DO YOU AGREE OR DISAGREE?

PLEASE LEAVE A COMMENT AND SHARE YOUR OPINION WITH US