Demand is very weak and the situation remains difficult in the global long steel products market. Mills are cutting production, protectionist measures are continuing full speed ahead, while China and other countries in the region are exporting a lot, putting pressure on prices. There is very severe competition in the market and every producer is fighting with its last penny in order to keep operating. Imports displaced by US tariffs are searching for homes, causing worldwide disruptions and any demand is contested by multiple origins.

Demand may show some improvement after the holiday season

The holiday season is over and we may observe relatively better demand in the coming months. For the last few weeks, a small price increase has been seen in Chinese domestic market, which has had a positive impact but further developments in China need to be observed. Anticipated interest rate cuts may also create a positive atmosphere in the global longs market. The price of scrap has moved sideways and the main problem is that mills are operating with no profits due to low capacity-utilization, which creates real damage for the future.

Imports still flood into Europe, summer production halts may support market balance

Imports continue to flood into Europe and demand there is weak. However, with European mills cutting production over the summer there is at least a chance of some balance returning to the market in the fourth quarter of the year. Whether this leads to a real turnaround remains to be seen. German domestic prices dropped substantially from June to August but now mills are trying to push prices back up again and recover some lost ground. Activity is still very slow, but the expectation is that September will be a better month.

Court appeals against Trump’s tariffs create further uncertainty

US President Trump has now had five of his tariff rulings challenged by courts of appeals. This will throw the market into uncertainty, more than before. It may take at least six months to have the appeals go through the court system all the way to the Supreme Court.

Domestic supply meets most demand in US longs market, prices soften a little

In the US, demand is very soft. With little to no imports, domestic supply seems to be meeting demand, which is why prices have not moved up even with the 50 percent duty on imports. On the contrary, most prices are moving down a little each week. Capacity utilization is still under 80 percent despite six months of “tariff protection”. More capacity is coming online, which means that the capacity utilization percentage will probably move down further. The market seems to be waiting for interest rate cuts. If the cut is just 0.25 percent, it will not be enough to stimulate the economy. Most stockists expect a reduction or a change in import duties, which is why they prefer to wait, instead of importing now in order to restock.

Current market is unstable and unpredictable, with an unsatisfactory outlook

Under these circumstances, the current status of the market can be described as unstable. Prices are within long-term trends, but market fundamentals and economic policies are unpredictable. The outlook of the market for the next quarter is also unstable and unsatisfactory, with weak demand and policy uncertainty pointing to continued weakness of the market.

DO YOU AGREE OR DISAGREE?  

PLEASE LEAVE A COMMENT AND SHARE YOUR OPINION WITH US        

The business environment in the global long steel products market, particularly in terms of the demand and supply balance, has not improved meaningfully. Other than that, the situation has worsened as the Trump Administration’s increase of US import duties up to 50 percent caught many exporters off guard. The uncertainty created by the Trump administration by doubling tariffs is terrific for those who are protected and terrifying for those under attack. These sudden changes in duties and tariffs make exporters to the US think twice about exporting and make it very difficult to come to a decision.

Buyers wait and see as outcome of talks awaited

Rumours about talks with Mexico and Canada and other countries’ approach to the US administration to see if they can obtain an exemption in any sense have put buyers into wait-and-see mode. On the other hand, huge debates and negotiations are being carried on between suppliers, receivers, and traders about who should be responsible for the extra burden for those cargoes which arrived at US ports after tariffs were raised to 50 percent.

Importers into US face serious difficulties

Importers into the US continue to face serious challenges, especially with cargoes already on the water or ready for shipment under L/C terms. Many are forced to either absorb heavy losses or cancel shipments altogether.

Prices creep up in US due to new 50 percent tariffs, consumers frustrated

In the US, demand remains moderate, but prices have started to creep up – largely due to the protection of the newly imposed 50 percent duty on all steel imports. Despite this, domestic prices are still not strong enough to justify new import orders. Meanwhile, persistently high interest rates are discouraging new investments and slowing down construction activity. In summary, aside from a few US domestic mills benefiting from the current trade environment, most steel consumers and processors remain frustrated with the situation.

Impossible to compete with exports from China and SE Asia

Elsewhere, it is not possible to compete with exports from China and Southeast Asia. Stimulus programs to help the market in China have not been effective at all. We can assume they will keep exporting heavily, which will mainly hit the other exporters in the region.

Europe flooded with cheap imports, regional mills face high costs

The weak dollar and displaced tons from Asia have encouraged imports and so Europe is flooded with cheap imported steel, while energy costs for European mills have gone up. Buyers have taken early and extended holidays, but scrap prices stay high. European mills are not able to cover melting costs. Unless demand picks up after the summer break, production cuts are likely.

Expectations of interest rate cuts provide some glimmer of hope

There is still some hope among market players that some of the recently announced tariffs will backfire. Expected interest rate cuts may be the only positive so far. However, it seems the US Federal Reserve will wait a little longer to see the impact of tariffs on inflation. Interest rate cuts are also expected in Turkey, though demand there is still low. The only activity is seen in construction in the earthquake-hit region and in the renewal of old buildings.

Market status unstable, short-term outlook unsatisfactory

The current status of the market can be described as unstable and the competition in the market is very strong all around. It is very difficult to predict the outlook of the market under the prevailing uncertainty created in the market. The market is structurally weak. Nothing will probably drive the market during July and August until the start of September. Accordingly, the short-term outlook for the market is unsatisfactory.

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, emphasized that demand in the global long steel products market continues to lag behind supply. He added that the situation was getting worse because of China’s aggressive export policy and that Chinese exporters would continue to be aggressive, which of course would drive other Asian exporters to be aggressive also.

The IREPAS chairman said the situation in the global long steel products market is deteriorating, adding that there is huge uncertainty on what the next couple of quarters will bring for the global long products market, where it seems the situation will be extremely difficult.

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: General market mood hopeful for improvement

Jens Björkman, the chairman of the raw material suppliers committee, summarized the committee meeting findings regarding the general situation in the global steel and raw material markets, noting that the markets have been struggling this year compared to the past few years amid the worsening of economies due to high inflation and interest rates. However, he stated that the general mood is hopeful for a return to something slightly more forward-looking and optimistic.

Regarding Western countries, he stated that high interest rates and inflation have been putting pressure on scrap generation in the US and the EU, and added that the interest rates in the EU are expected to be cut during the spring. With the anticipated increase in scrap demand due to electric arc furnace investments especially in the US, Canada and Europe, Mr. Björkman noted that scrap flows will change significantly in the next 10 years, regionalizing scrap generation where scrap demand is high. In addition, he stated that steel producers have started to look for alternatives to scrap like pig iron, HBI and DRI to cover their needs for raw material. Indicating that scrap generation in Europe is down by 15-50 percent depending on the part of the region, Björkman said that, with the Carbon Border Adjustment Mechanism (CBAM), European scrap suppliers will try to keep scrap volumes within the regional market, reducing scrap exports from the region especially to Turkey, which operates mostly with electric arc furnaces and has significant demand for scrap.

Looking at China, noting that the country’s economy was expected to rebound after the Chinese New Year holiday but that these expectations did not materialize, he stated that China’s economy is going through a period of normalization. Meanwhile, pointing out that before the recent rebound iron ore prices had fallen to $100/mt CFR in the first quarter this year from the higher-than-expected level last year of $120/mt CFR, he said that the factors contributing to the price drop included high iron ore inventories at Chinese ports, slow demand and lower steel production. He concluded by saying that the market in China is adjusting to the lack of recovery of demand after the Chinese New Year holiday, adding that he expects iron ore prices to remain at quite high levels.

Traders at IREPAS: Global demand to be supplied locally, market conditions lead to regionalization

F. D. Baysal, the chairman of the traders committee, stated that there is demand globally but that it will be supplied locally, adding that ongoing trade tensions, global conflicts and political instability have changed trade routes, resulting in regionalization.

Looking at the other factors that lead to regionalization, Mr. Baysal expressed the view that the EU’s safeguard measures will be extended for another two years and that its quota volume adjustment will be minimal if any. Regarding the EU’s Carbon Border Adjustment Mechanism, he stated that it will put pressure on other countries, especially on blast furnace-based producers.

Remarking that Turkey’s export markets have been limited due to the US safeguard measures, the EU quota restrictions and the geopolitical tensions in the Middle East, the chairman of the traders committee stated that there are still some export opportunities for the country, including Syria, Iraq, eastern Europe, Africa and possibly Yemen. In addition, noting that the shipping crisis in the Red Sea has affected freight rates and container shipments a lot more than bulk shipments, shipments had to be shifted from containers to bulk, leading to additional costs.

Looking at China, Baysal said that the low steel demand in the country amid cancelled infrastructure projects has resulted in an increase in the country’s exports, with China dominating the global market with its lower prices and higher quality of steel, leading the strong competition. He also cited the Chinese Metallurgical Industry Institute’s prediction for a 1.7 percent drop in China’s steel demand in 2024, after a 3.3 percent decline in 2023, while further noting that China’s steel export volume increased by 14 percent year on year in the first quarter, though the value of its steel exports during this period was down by 20 percent year on year.

Producers at IREPAS: Low demand and Chinese exports weigh heavily on global steel market

Murat Cebecioğlu, chairman of IREPAS and also chairman of the producers committee, shared with participants the conclusions reached by producers regarding the current situation in the markets. He said that the GCC region is more optimistic in terms of business given the big infrastructure projects in the pipeline there, while market conditions in Egypt are getting better and better as the country’s currency issue has mostly been resolved, though the Suez Canal crisis remains a challenge. In some EU markets, the economy is picking up and inflation seems to be under control, while in others demand still remains quite low.

Commenting on the situation in China, the hot topic at the conference, Mr. Cebecioğlu said that Chinese exports will definitely affect the global market negatively and will reach high levels as they did back in 2015. However, this time the number of export markets is limited because of protectionism and Chinese exports will be more problematic in terms of competition. He went on to say that, apart from China, Malaysia, Indonesia and Vietnam are also exporting heavily and competing with each other. This will affect other suppliers and, as one of the biggest long steel exporters, Turkey is already feeling the effects, the chairman of the producers committee noted. Chinese exports are also taking a toll on the EU market, which is also struggling with very low demand especially in the northern part of the region.

Other exporters to the EU have to deal with quota measures as well as the Chinese competition. Cebecioğlu said the EU will most probably extend its quotas for another two years and, with new suppliers such as the GCC and North Africa, things will be tough this year before picking up and getting better next year.

Responding to a question regarding how Turkish mills managed to increase production in the first quarter of the current year, the committee chairman said that, in terms of sales, the first quarter this year was much better than the corresponding period last year. Turkish mills were able to sell considerable amounts to the EU and, with the quotas opening up, they had a window for exports. Commenting on the reconstruction works in Turkey’s southern region which was devastated by earthquakes last year, Cebecioğlu stated, “Construction activity has already started in the region, and it is mainly the mills in the region that are benefitting from all this. Since export activity is very low, this gives these mills a little bit of a break, and also funding should not be a problem as these projects are being financed by the government.”

It seems like everybody in the global long steel products is waiting for some really positive developments to materialize. However, unfortunately, there is no substantive positive news coming out of China. Nevertheless, the country is driving iron ore prices and coal prices, while many long product mills are working to keep margins between scrap and finished products on the plus side. Meanwhile, China is reporting that rebar produced by both EAF-based and BF-based producers in the country are being transacted without positive margins.

Longs demand in EU hit by variety of negative factors

EU import quotas for wire rod were oversubscribed by early January. Overall, demand was down by 17 percent for reinforcing bars and down 10 percent for wire rods in Europe, but Germany was affected the worst. The reasons are, of course, high interest rates, higher costs and the increase of bureaucracy due to environmental regulations by Brussels and local governments. EU mills’ prices have increased slightly due to costs. Going forward, a lot of wire rod and reinforcing bar shipments are expected from North Africa and Turkey.

Turkey’s longs exports to Israel under threat, new safeguard impacts wire rod imports

The political dispute between Israel and Turkey may affect Turkish mills’ biggest export market. The recently announced safeguard measure against wire rod imports in Turkey has practically closed opportunities for wire rod imports since the import duty is quite high for the regularly purchased origins, while the quotas will be viable businesswise only for supplies from some countries. It is highly likely that imports from Egypt and Malaysia will now be excluded from the Turkish market. Russian exports will also be halted unless the Russian mills agree to absorb the $175/mt tax.

Positive sentiment prevails in US longs market

Demand in the US has not changed much. However, as interest rates are coming down, sentiment in the markets is upbeat. The mood is positive in particular in residential  construction. As for imports, there are only two countries, Egypt and Algeria, that are exporting some volumes to the US. The long-standing traditional exporter, Turkey, is not  competitive anymore due to very high antidumping rates.

Longs producers in US happy with prices and volumes

The US is certainly an outlier, spreading higher prices to Canada and Mexico.  The margins between prices of scrap and sheet are euphoric, while no long product producer in the US can complain about selling prices and less-than-decent volumes.

Interest rate cuts, if enacted, could give boost

Inflation seems to be going down in the US and the EU. If central banks start reducing interest rates, it may give a serious boost to economies once again.

Fears of recession and geopolitical uncertainties add to negativity

Other than the abovementioned factors, there are not many positives in the market due to the seasonal slowdown in most of the world and recessions in many countries as well  as political uncertainties. There are two full-scale wars going on and Red Sea interruptions have now added to the cost of shipping, making business even harder. Generally,  there is a high risk of markets becoming even more local due to trade route disruptions such as those in the Red Sea and also in the Panama Canal.

Competition becomes more and more local

Competition in the market is becoming more and more local. Most would say it is difficult to compete as you start with a loss and stay with a loss if you transact any new kind of business. Some close-by repetitive business keeps most mills afloat.

Market status mostly stable but low, outlook is challenging

Under these circumstances, the current status of the market can be described as mostly stable but on the low side, while the outlook is challenging and slow.

DO YOU AGREE OR DISAGREE?  

PLEASE LEAVE A COMMENT AND SHARE YOUR OPINION WITH US