The global long steel products market is slowing down in general, which is putting pressure on producers. Demand for reinforcing bars and wire rods remains very weak and there is strong pressure on prices from the new exporters – Algeria, Egypt, the UAE and Saudi Arabia – who are in the market with very aggressive offers.

Business still stagnant in US, high interest rates a major factor 

Business in the US is still stagnant. Demand has slowed down and supply is the same, putting pressure on prices. High interest rates constitute the biggest factor in the slowdown of both commercial and residential construction. The US Federal Reserve’s efforts to keep inflation under control are working, while slowing down the economy. Flat steel prices are still under pressure, with flats mainly supplied from domestic sources.

Non-traditional sources active in exports, Turkey struggles due to trade measures 

Exports are only active from non-traditional sources like Algeria and Egypt, which are subject to no antidumping or countervailing duty measures so far. Turkey has been unfairly hit with high antidumping duty, when one mill honored a contract made before the Ukrainian war and delivered as pledged, even after the surge in prices. All Turkish mills (except one) were conveniently painted with the same brush.

New US and EU measures target Russian exports of semis and raw materials 

It seems that the situation in Ukraine will be a never-ending story. However, the new restrictions to be introduced by the US and the EU will create more complications for producers who import Russian semis and raw materials and export their goods to the US and the EU, namely, Turkey and Egypt. The EU is already demanding a declaration from producers confirming no Russian input for goods that are shipped into the EU. US officials are paying visits to individual companies explaining the risks of not cutting ties with Russia. We will witness more circumvention cases in the coming period. The halting of Russian steel imports in six weeks’ time into the EU should have a significant impact. It is difficult to prevail in defensive cases, which may cause Turkey to strongly reduce imports from Russia.

US and EU to produce less steel in 2023 than in 2022 

Both the US and the EU will produce less steel in 2023 than in 2022.  In the US, flat product output is down five percent year to date, while domestic long product output is down even more.

Europe very quiet due to holidays, private sector investors lack confidence 

Europe has been very quiet over the last few weeks due to the holidays. Prices are very flat and there are no signs of improvement in sight. The main reason is low activity and low ordering from the market. Mills are fighting for every ton which is available. Overcapacities in the EU are preventing mills from raising prices. Imports are practically non-existent right now as one can see from the safeguard import statistics. All EU countries are trying to avoid a recession by injecting money into the economy, but the private sector is afraid due to all the uncertainties surrounding energy prices, interest rates and additional burdens which may come from Brussels in relation to CO2 emissions. All these uncertainties are holding the private sector back from investing.

Strong domestic construction in Russia restrains its exports 

Russia is experiencing strong growth in its domestic construction sector and so it is not so hungry for exports.

Stimulus packages in China have no impact on its exports 

So far, all stimulus packages introduced in China have had no impact on exports that affects global steel prices. China’s BOFs are working at over 90 percent capacity utilization and EAFs at under 50 percent.

Scrap demand falls amid reduced steel outputs, scrap prices hold firm 

Slowing production has also led to lower ferrous scrap demand. European demand is expected to contract in the coming quarter. Although demand is slowing down for scrap also, inflows are dropping for scrap traders. Availability is low and this is exerting pressure on recyclers to get material to their yards and shredders. Scrap prices are still holding firm, mainly because suppliers are much more organized. They may stay around the mid-$300s/mt unless demand for reinforcing bar falls further. India seems to have a weak domestic market, but, on the other hand, it is paying top bucks for scrap, which supports scrap at the mid-$300s/mt.

Some new projects in Europe, Turkey and S. Arabia to provide support 

There are a number of projects coming on stream in Europe and Turkey. There is also the NEOM city project in Saudi Arabia, with demand for a huge quantity of reinforcing bars which is supposed to come on stream shortly.

Freight costs lower but still higher than before pandemic, clean energy an issue for steel sector 

Raw material prices are softening a little and shipping prices are coming down but are still higher than pre-pandemic prices. New policies on carbon emission limitations and clean energy will be a problem for the steel industry in the future. Ironically, a lot of Chinese “clean” energy technology is made in factories using coal-powered electricity. Clean energy technology should come from clean supply chains, though cheap Chinese inputs such as polysilicon for solar panels and critical minerals for batteries are often made or extracted by cheap labor in other parts of the world.

US still a locomotive of the global economy 

The US economy and US industrial orders are still the locomotive of the global economy. Electricity prices have also lessened since last year’s fluctuations. Inflation no longer seems a threat and in general autumn is expected to be better than the first seven months of 2023.

International competition weak amid low prices and high logistics costs 

International competition in the market is weak because prices are so low that logistics are killing trade. There is almost no international competition. Otherwise, the competition is for volumes, not to increase them or simply to keep them stable, but rather to limit the slide in volumes as much as possible. Imports are dropping in North America and the EU, which of course affects the MENA region and Latin America.

Current market status unstable, outlook unsatisfactory except for scrap suppliers 

Under these circumstances, the current status of the market can be described as unstable and unpredictable. The outlook for the next quarter is mostly unstable and unsatisfactory, except for ferrous scrap suppliers.

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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 has continued to increase recently, and particularly demand in China and developed economies continues to push the market up. At the same time, international supply has tightened even further. Most mills are offering a few months ahead, thereby contributing to upward movement of prices. There are imbalances in rebar supply-demand, but it looks like customers are resigned to accepting the continuing price increases. The spreads on production have increased overall.

Strong demand and short supply in EU, construction companies squeezed by high prices

Demand in the EU remains strong, but the market is short of steel. Construction companies have tried to push cut and benders down on price by holding back orders but are now with their backs to the wall and have to place orders at much higher prices compared to their budgets. Most European cut and benders hold very toxic order books, with sales being approximately €200-300 per metric ton below replacement costs. EU mills could easily increase prices significantly as there is no available alternative for benders. Imports are not competitive, and quotas have been fully used up. Rebar prices compared to HRC prices are completely out of line.

Prices at record highs in US, domestic producers in control, credit an issue for customers

The North American market is also short of steel. In the US, demand is way up, but to ensure supply is far more difficult. The order books of all domestic mills are full, with order deliveries extending up to four to eight weeks. Imports are even harder to ship, as international mills are even busier. Besides, shipping is a big challenge, with more delays at double or triple the costs. Prices are at historic highs, making credit decisions even harder. Almost all customers have maxed out their credit limits with double the prices on most items. In short, the situation is most advantageous to domestic producers who are working at near full capacity, but traders have difficulty in supplying and/or financing the growing demand. Inflation in most commodities is around the corner. While both the US and the EU are short of steel and still have their protectionist measures in place, it seems that this situation will continue for a while yet.

Chinese production surges, its semis imports provide boost for global prices

China continues to roar ahead, now surpassing three million metric tons of liquid steel production per day. Despite the surge in Chinese steel production in the first and second quarters, China keeps importing semi-finished material, which has pushed up prices in the global market.  At the end of April, China announced the cancellation of the tax rebates on exports and, as a result, it most probably will not be exporting in the near future. This will open new opportunities for other market players like Turkey to increase their exports. Such recent decisions in China should result in pressure pushing prices up even more.

Iron ore prices rising, Asian market back to pre-Covid levels except for India

Iron ore prices are heading higher and the Asian market is fully back to pre-Covid levels, except for India whose steel output and scrap imports are expected to be negatively impacted.

Turkey remains an exception to the positive global longs demand situation

Demand for long steel products globally is good except in Turkey due to the high interest rates there. However, highest-ever prices are being experienced in the flat steel segment worldwide.

Demand increases even further in Latin America

Latin America is no exception in the global market. Supply is tightening and demand is increasing even further. Brazil is deciding to export less due to domestic demand. With further improvements in the vaccination process in Latin America, an increase is also expected in the demand scenario, which is already at a good level. Domestic sales continue to improve in the region, with higher volumes compared to the pre-pandemic period.

Lead times extended, entire supply chain is earning profits

Lead times are long in the market and the entire supply chain is earning profits. Disrupted supply chains and low stocks create pockets of demand in different areas of the world, which keep driving the market up. Stimulus programs also help increase demand. Although there has been news of more capacities coming back on stream, it seems the current situation will continue for the rest of the year.

Vaccinations and summer season to support return to normal, boosting demand

The global business environment is getting better with the increased distribution of vaccines, especially where they have been administered at rates exceeding 30 percent. Vaccinations and the summer season will help most countries resume a normal form of life, which in turn would support demand.

Credit insurance becomes an issue for buyers as prices continue to rise

Shipping is still the biggest challenge. Besides shipping, credit insurance is decreasing in volume as prices go higher. So far, steel mill customers have been able to find ways to circumvent this, but it remains an issue for the future. Another issue is that lead times are shrinking in the US market for ‘nice orders’. On the other hand, geopolitical winds may cause changes in the landscape.

Competition is healthy, outlook for next quarter is very good

Competition in the market is healthy but demand is sufficient for everyone. Accordingly, there is no concern about competition in general. The current status of the market is perfect to proceed with a very good outlook for the next quarter.

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At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that the Covid-19 pandemic has moved in a wave from Asia to America through Europe and the Middle East and has certainly worsened the market situation. He added that there has been a reduction in both supply and demand around the world, except in China where output keeps growing, and that demand in the global long steel products market is indeed not as bad as the newspapers and media outlets report.

IREPAS chairman also added that the very strong quarter seen in China and the current outlook supported by the country’s net importation of steel products have been driving the rebound. He said almost the whole market is driven by daily news and signals from China nowadays, adding that after a poor spring characterized by the idling of production capacities due to the coronavirus pandemic, we are currently in a period of recovery. But the Chairman also warned that with the ongoing political uncertainties and new threats from many corners around the globe, the overall market situation is becoming cloudy and more uncertain.

Raw Material Suppliers at IREPAS: Main savior was Chinese demand

Jens Björkman, the chairman of the raw material suppliers committee, stated that, with the start of the pandemic, prices, demand and scrap collection crashed, noting that scrap collection halted dramatically all over the world but that in some regions the steel industries were hugely affected.

The committee chairman said that, for example, in the northern EU the lockdown was less dramatic than in the southern EU, and so some raw material businesses shifted their focus to northern EU scrap-based mills. He pointed out that, once the initial effect faded, scrap prices were fairly stable from April. Looking at the summer months, Mr. Björkman said that most regions were recovering fairly quickly. He recalled that scrap prices were slightly under $300/mt in the pre-pandemic period, went down to around $220/mt, and are now back at levels similar to those before the pandemic, underlining that the main savior was China’s extreme demand for raw materials and semi-finished steel, which they imported from many regions of the world. During this period, the weakening of the US dollar also resulted in scrap prices going upwards, he noted.

Commenting on the possible impacts of the outcome of the US presidential election on the scrap markets, the raw material suppliers committee chairman said that what is important for the scrap market is investments in new melting furnaces and these capacity growth projects cannot depend on a president’s term of office. So in the long run, he said he does not expect the election to affect the steel industry, though there may be some differences in how to conduct trade.

On China becoming a net importer, Mr. Björkman said that this means China will probably have less trade frictions with the US when it comes to steel, while he sees a build-up of steel capacities outside China, namely in ASEAN countries, as being more problematic.

Regarding the outlook, while admitting that there is a lot of uncertainty about the continuation of lockdowns or possible new lockdowns, Björkman said that he is a little bit more optimistic for the demand side. The committee chairman stated that, after the initial phase of shock due to the pandemic, many have been surprised regarding the positive aspects. He added that some companies issued warnings regarding negative results, but business turned out to be better than expected in many cases, though some are still struggling.

Traders at IREPAS: Prices increase amid regional trade flow interruptions

Wilhelm Alff and F.D. Baysal, co-chairmen of the traders committee, informed the participants about the market developments during the last six months. Mr. Baysal said that market conditions in the US are stable, improving after the big shock caused by the pandemic, while capacity utilization rates are still way behind 2019 levels. He pointed out that, compared to early September last year, capacity utilization rates are still 15 percentage points lower. Regarding the construction sector, he said that the residential segment showed an improvement, though the non-residential segment is still down with little prospects of a recovery. He also said that in September prices finally saw an increase in all categories.

Mr. Baysal said that there will not be many changes regarding trade measures depending on the US election results. He said he believed that if Trump wins the US will continue filing a maximum number of AD and CVD investigations until no competition is left and that Section 232 will continue and ,while Biden may be more sympathetic to free trade, Section 232 will still remain in force if Biden wins.

Baysal also added that, for non-residential construction in the US, there will be some fundamental changes and some are already in progress. For example, as people are working from home and companies will occupy less office space, he expects a major stagnation in this market. He also expects less demand for commercial buildings.

As regards Central and South America, Baysal said that these countries are on the verge of a slow improvement in both demand and supply. Some countries such as Mexico and Brazil were hit hard by the pandemic. However, both of these countries including Argentina are exempt from Section 232, and so their supply will increase with demand coming from the US. Nevertheless, he added that he does not foresee a big improvement in terms of domestic demand in 2020.

Commenting on Europe, Wilhelm Alff said that in Germany construction continued uninterruptedly, with demand for steel being even higher than normal, as many construction sites speeded up projects worrying that they might have to shut down altogether. On the other hand, in countries such as Spain, France, Italy and Poland, demand decreased as trade flows were interrupted and consumption decreased by 10-25 percent in these areas. He noted that, after declining at the beginning of the pandemic, scrap prices have increased by $90/mt up to the present because of the regional interruption of trade flows. Meanwhile, rebar prices in the EU have increased by €60 compared to the beginning of the pandemic.

Regarding EU quotas, Alff gave some background information on the changes in EU safeguard measures, indicating that the quarterly allocation which came into force as of July 1 is an advantage, because this way the market is not flooded with all the material arriving at the same time. He said that the safeguard measures have already led to a drastic reduction in imports, and pointed out that in 2019 steel imports into the EU totaled 1.8 million mt, while in the first half of the current year total steel imports came to less than 400,000 mt.

Producers at IREPAS: Global long steel demand more or less same as before pandemic

Murat Cebecioğlu, chairman of IREPAS and also of the producers committee at the virtual event, said that the pandemic did of course worsen the market situation, reducing demand, while remarking that China has been the driving force behind the whole market and has no intention to export. He indicated that the situation in the global long products market is now unchanged compared to the pre-pandemic period; the market is stable and demand is more or less the same as it was before. Regional markets are performing well, with demand returning and EU-based cut-and-benders are quite busy. Looking at North America, prices in the US finally moved up on the back of higher raw material prices. The IREPAS chairman stated that the upward trend of scrap prices has already started slowing down, with a downward correction observed these current days, adding that producers prefer billet unless a strong spread appears between billet and scrap prices.

Commenting on whether the recent increase in Turkish rebar cargoes to the US will continue, the chairman of the producers committee said, “New shipments were booked in the aftermath of the Section 232 duty rate going back to 25 percent; that is why it looks like there is a surge. The truth is that Turkey will not be able to reach the level of exports it had prior to Section 232. When the duty rate was 50 percent, Turkey was replaced by domestic producers and other countries such as Spain, Italy and Portugal. It is not easy to recover the market shares in the US lost to other countries, especially while Turkey is still subject to AD and CVD measures.”

Mr. Cebecioğlu said that the increase in Turkey’s domestic steel consumption may be the result of the reduction in interest rates, which boosted demand for steel, providing support for the domestic market. He added, however, that he has doubts about whether this growth will persist.

The situation in the global long steel products market has not changed much since last month. Almost the whole market is driven by daily news and signals from China. It seems that, apart from China, there seems to be a smaller other global market. Buyers and producers are acting more regionally due to the Covid-19 coronavirus pandemic and safeguard measures. The overall market can be described as mostly stable with some fluctuations in certain areas and instability at higher demand and higher prices.

Most mills outside China struggle but supported by H1, fears persist for winter

Most mills outside China are suffering as their production rates and financial results are both down. Having that said, mills are still positive based on what they have had during the first half of the year. On the other hand, there is huge uncertainty regarding what the winter may bring as a second wave of the pandemic seems to be around the corner.

Regional markets are performing well despite greater uncertainty

With the ongoing political uncertainties and new threats from many corners around the globe, the overall market situation is becoming cloudy and more uncertain. Despite all these developments, regional markets are performing well and prices are firming up.

Demand returns in Europe

Demand has returned in Europe. Cut and benders are very busy and so far a relatively low number of projects are on hold. But the biggest problem for European cut and benders is that they took in too many orders at low prices earlier this year during the worst period of the coronavirus – expecting prices to collapse – and are now confronted with stable to rising prices due to increasing raw material costs. Accordingly, demand is strong, supply is getting tighter and expectations of further price rises are more widespread now.

Demand recovers in North America, despite fears of second wave of Covid-19

Demand in North America is also back and US prices finally moved up following the raw material price increases. Since import prices have risen even higher, the situation in favor of US domestic mills has not changed. On the other hand, further increases are not expected as a second wave of the pandemic (or a continuation of the first one) appears to be on the doorstep.

Brazilian steel sector’s operational results down in Jan-July, but some recovery seen

Brazil’s steel production, though recovering from the previous lows during the coronavirus crisis, was still much lower in the January-July period this year than in the same period last year. In January-July of the current year, Brazil’s crude steel production amounted to 17.1 million mt, down 13.9 percent year on year. Brazilian outputs of semis and finished steel products in the given period respectively dropped by 9.3 percent to 4.8 million mt and by 13 percent to 11.7 million mt, year on year. Currently, the sector is operating at 60.5 percent of its total capacity compared to 48.5 percent in June, with a growing number of blast furnaces resuming operations. Apparent consumption fell by 8.2 percent to 11.2 million mt in the first seven months this year amid a 7.6 percent drop in domestic sales (10 million mt) and an 18.5 percent decline in imports (1.2 million mt). Exports fell by 8.7 percent to seven million mt. The Brazilian steel association (IABr) believes that the only way to improve operating rates for Brazilian steel producers is to try to increase exports, but this will be very difficult for them because of excess capacity and protectionist measures.

Period of strong recovery currently observed

After a poor spring characterized by the idling of production capacities due to the coronavirus pandemic, we are currently in a period of strong recovery. Economies are opening up, production is ramping up towards normal levels and demand is strong from most parts of the world simultaneously. Regional demand has been recovering and business is returning. Inventories in the supply chain need to be replenished.

China is driving the rebound

The very strong quarter seen in China and the current outlook supported by the country’s net importation of steel products have been driving the rebound. Investment activities and stimulus measures in China are positive for the long steel product segment. The country is showing strong domestic demand and is not in the mood to export. It became a net importer in June, maintained this trend in July and will probably also do so in August. With what China is consuming, the rest of the world feels the positive effects.

European and US service centers hold low stocks, replenishment pushes up deal prices

Service centers in Europe and the US have been low on stocks and, with any sign of an uptick, those stocks are being replenished with higher transaction prices resulting. The increase in prices that has followed the rise in raw material prices is positive for those who have sufficient stocks for September.

Producers need to be careful not to relaunch too much idled capacity

The key here is that steel producers should not be misled by the current demand into firing up more of their furnaces, which could exert more supply pressure on the market during winter.

Competition remains intense, particularly in Asia

Competition in the market is still high and intense particularly in Asia where price changes of US$1/mt can swing the focus of buyers to supplies of a different origin. Regional demand is strong in Latin America. At present, China is buying almost whatever is available in the market as far as raw materials and semis are concerned, which eases the competition overall.

Outlook generally satisfactory but many unknowns due to the pandemic

Although the outlook for the next quarter is generally satisfactory, there are a lot of unknowns due to the pandemic which make the outlook a bit misty and foggy.

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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.

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The supply-demand balance in the global long steel products market has been worsening over the last few weeks. Protective actions such as antidumping and countervailing duty (CVD) cases and import taxes, coupled with increasing capacities in some traditional import markets, have put export-dependent countries in a difficult situation.

Protective actions raise levels of uncertainty in US market

The market situation has definitely become worse in the US. There was an unexpected countervailing duty announcement on reinforcing bar imports. On top of that, there is now the unknown threat from the Section 232 investigation hanging over market players’ heads as regards the making of any import decisions. Section 232 obviously delayed the final decisions in the antidumping and countervailing duty cases. Nevertheless, demand seems to be flat in the US.

Section 232 may be another shock wave for US market

Market players expect measures to be passed under Section 232 and that this will constitute another shock wave like the exit from the Paris environmental agreement. This possesses the potential to turn things quickly upside down and make the market unpredictable for everyone. Turkey, of course, will be in a very difficult situation, losing one of its biggest markets after it has already lost market shares in the Middle East.

Weak prospects for upward price movement in EU long steel products market

Demand is not great in some southern and eastern EU countries. As Algeria is dormant on imports with no import licenses released yet and with Algerian domestic producers trying to protect their own turf and meet all domestic requirements themselves, it seems that long product prices in the EU do not have any chance of moving up with the exception of being cost-driven on the back of scrap prices. The future may bring along tougher conditions for the European market depending on the outcome of the antidumping and countervailing investigation on wire rod imports to the US and on the US DOC’s Section 232 investigation.

Still too much existing capacity in China

On the other hand, the volatility in China is not even as attractive as it used to be. There is still too much existing capacity, and, if demand for long products in China slows down even only a little bit, it would provide so much extra capacity to the world markets that the previous imbalance will instantly be restored.

Demand poor but stable in Latin America

Elsewhere, demand is very poor but stable in Latin America. There is no sign of a change in this region in the short or medium term. Excess capacity remains an issue and continues to put pressure on local price dynamics. Political uncertainties in Brazil have delayed any recovery of the local market. Unfortunately, it looks like 2017 will be another lost year for the Brazilian market.

Domestic prices allow little room for imports in GCC and Southeast Asia

In the GCC and Southeast Asian markets, market prices do not allow imports to play any significant role.

New crisis in GCC region will probably be resolved quickly

The new political crisis in the GCC region has added to the uncertainty in the global market. It can be expected that reinforcing bar exports from Qatar to Saudi Arabia will stop as well as shipments of billets from Qatar to the UAE for re-rolling into wire rods as the shipments pass through Saudi Arabia. Having said that, the crisis will probably be resolved quickly as it is bad for the region as a whole.

Scrap prices remain stable with support from demand side

On the raw materials side, prices of iron ore and coking coal are both down, whereas ferrous scrap prices are relatively stable. Market participants think that ferrous scrap prices should decrease, but this is not happening. Ferrous scrap demand in Europe and the US remained solid during the spring and this is also expected to be the case in the coming month as demand from steel mills is strong. Turkish steel mills are enjoying a stronger domestic market after the April referendum and so they have raised their steel outputs, which means their demand for scrap is greater.

How long will China continue to export scrap?

One issue causing uncertainty in the scrap sector is the question of how much and how long Chinese scrap will be exported to surrounding regions instead of being consumed in the Chinese domestic market. China continues to export scrap, albeit in relatively small tonnages.

Global long steel market generally boosted by improved demand

Apart from all the above, the long steel markets have shown improved demand and reasonable supply levels, although some points of distress have been observed in Mediterranean countries which depend on exports, due to import restrictions at destinations.

Improved demand in Russia has also been a factor, contributing to the general improvement of sentiment. Stocks are, in general, low in the supply chain and buying activity has shown a good consistency.

Better demand also seen in Turkey and some EU countries

Demand has been increasing in the Turkish domestic market after the referendum in April. There are also signs of improvement in some European countries. Some EU countries have been seeing very good demand, which is expected to be stable for the coming years due to infrastructure investments.

Positive margins for producers amid good demand and reasonable prices

Demand is still good and prices are reasonable on both ends, resulting in positive margins for steel producers, so that after two to three years steel mills can start publishing the positive earnings which are essential for the future of the industry.

EU and US mills operating at decent to strong capacity usage rates

International prices seem to have found a floor, which brings more stability. European and US steel mills are running at decent to strong production figures. The US mills are now operating at around 75 percent capacity utilization.

Chinese influence on export markets remains limited

The Chinese influence in the export markets has also decreased as they are not putting pressure on the international reinforcing bar markets, which is always good for the supply-demand balance in the global long products market.

Turkish mills’ domestic focus removes some competitive pressure from export markets

Competition is still high in the international market, but the fact that Turkish mills are now focused mainly on their domestic market has taken some of the competitive pressure out of the overseas markets.

Turkish discusses lowering of rebar import tariffs

Interestingly, contrary to the rest of the world where protectionism is becoming ever more widespread, Turkey has been discussing the lowering of tariffs on imports of reinforcing bars.

Despite uncertainties, general stability prevails in global market

Despite all the uncertainties, the current status of the market can be described as generally stable although there are some fluctuations here and there.

Outlook remains positive but many unknown factors make predictions difficult

The outlook for the next quarter seems to be positive, balanced and satisfactory, but at the same time there are so many unknown factors, which makes it hard to forecast the future. The market is more difficult to judge now than at any other time this year. Factors like the Section 232 case and the lack of licences in Algeria are contributing to placing even more pressure on the market.

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The supply-demand balance continues to improve in regions like the US, Europe and Asia, contributing to a brighter picture in the  global long steel products market.

US market boosted by restocking and infrastructure spending expectations

Demand has improved in the US as buyers have been restocking. In addition, President Trump’s promise to spend one trillion dollars on infrastructure has hyped up the market even more. However, the reality is that it will take two to three years down the line to start such projects and they will all have a “Buy American” clause which will not excite importers.

Trade from Turkey and Taiwan to US to continue after preliminary duty announcement

In the immediate term, import supply into the US will be affected by the preliminary duties in the antidumping and countervailing duty investigations being somewhat higher than expected against imports from Turkey and being outrageously high against imports from Japan. Nevertheless, the margins against Turkish and Taiwanese imports will allow trade flows from these sources to continue, but the same will not be the case for imports from Japan. The resolution of the antidumping investigation against reinforcing bar imports in to the US may help end uncertainty and take the market up another step.

Suppliers find new alternatives amid import restrictions

In other areas where exports have been adversely effected by restrictions imposed in destination markets, suppliers are finding new alternatives.

Good news on the Chinese front

Demand in China is also good and prices there are on an upward trend. It seems highly likely that China has indeed taken over 80 million metric tons per year of production out of the market, as its export volume has been reduced significantly despite its huge domestic output. The result is that Turkish products are more competitive in the export markets.

EU mills unable to raise prices significantly despite positive demand

EU mills, on the other hand, are not able to increase prices significantly although demand is very good in Germany, the Netherlands and the UK.

No sign of recovery in Latin America in short term

Having said all the above, demand in Latin America remains weak with no sign of recovery in the short term, despite the overall positive expectations.

Business sentiment continues to improve in global market

Business sentiment in the global long products market is pretty positive and keeps improving, though there have been fluctuations in certain areas due to ongoing instability. Buyers and sellers agree that multiple markets are gaining strength simultaneously, while antidumping uncertainties are now out of the way for imports into the US at least for the time being. Prices and spreads are stable at higher levels than those of the previous year. However, global production has started to move up, which is not good. Chinese mills should receive good domestic demand in March in line with their anticipations, so that the supply-demand balance should remain as it is in the global market.

Firm ferrous scrap prices should keep production costs at current levels

Ferrous scrap prices are up and maintaining their strength, which should keep the actual cost of production at current levels at least for a while. With the “Buy American” provision, we can foresee fewer exports of ferrous scrap from the US. We may even witness an increase in scrap exports to the US depending on future developments, which could lead to a shortage of scrap in the market.

Competition is strong but within reason

Competition in the global long products market is still strong but within reason. Lead times for delivery of raw materials have increased.

Outlook is positive but a certain degree of unpredictability remains

It is difficult to predict the market in the short term. The outlook is satisfactory to very good in certain areas and prices should increase due to the recently announced preliminary antidumping and countervailing duty rates against imports into the US. However, there are still too many factors outside of the regular trade causing a certain degree of unpredictability.

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Conditions in the global long steel products market have improved significantly and a clear change to positive sentiment has been observed in the industry, something not seen in recent years.

Chinese demand and supply restructuring boost prices and margins

Domestic demand in China, together with a restructuring of supply at all levels from raw materials to finished products, is helping the market to move up in terms of both price and margins. Meanwhile, the supply and demand equation has already been balanced in the rest of the world. Most countries have already closed their doors to outside supply, creating a protected environment. It yet remains to be seen, of course, how healthy protectionism will be for the industry. That said, the international aspect of the steel market has declined significantly, as the focus is more domestic nowadays.

Chinese export growth does not appear to be on the horizon

Chinese origin steel products are staying mostly in Asia. Currently, the largest non-Asian destination for Chinese steel products is Latin America, which is not the strongest market. Therefore, export growth does not seem to be on the horizon for China. As exports from China are no longer significant outside of Asia, there is not much pressure on international prices, giving confidence to the markets.

Very positive price dynamics for flat products also influence pricing of longs

Very positive price dynamics in flat products are also influencing pricing policies for long products. In North America, the EU, Turkey and Asia, we have seen several price increases in the range of $40-60 per metric ton, which is also unusual, on back of cost increases. The whole world has adjusted, though with South America lagging behind.

Latin America remains open to Chinese exports

Some price improvements, mainly driven by costs (coal, iron ore), have been seen in Latin America, but very little or no demand growth has been observed. While protectionism continues to increase and is reshaping the international trade flow, Latin America remains open to Chinese exports and imports into the region have continued to increase.

Higher raw material prices also contribute to better sentiment for longs prices

The rise in raw material prices is also contributing to the positive sentiment in regard to long product prices in the market. Margin management seems to be back in the forefront of steel producers’ thinking, which is a very good development.

Restocking of steel has picked up  

With lower steel exports month on month from China, producers in the rest of the world have seen better demand for their own steel products and higher commodity prices have resulted in added demand for scrap, which likely will continue into the New Year. Restocking of steel is picking up, adding demand to the supply chain. China has imported scrap for the first time in a while in order to make use of its relative advantage over virgin raw materials. Greater activity is observed in derivatives, especially for iron ore, creating some commotion and resulting in increased volatility.

Competition still observed in markets where demand is stronger

There is obviously not much competition in the protected markets, but competition can still be unreasonable in open markets, though not to the extent seen before the improvements recorded in the past couple of months. Nevertheless, we still see competition in markets where demand is stronger than in others. As long as Chinese steel products stay at home, the rest of the world can get along very well despite strong competition. Latin America, of course, remains very much exposed to exports from China.

Outlook very good for next quarter, gloomier for longer term

The global scenario remains gloomy in the medium-to-long term, with too much uncertainty still evident. However, the current status of the market is very stable and is set to continue into the first quarter of 2017. The outlook for the next quarter is very good and satisfactory. Any change in raw material costs should lag one quarter before translating into finished product prices. It looks to be a very happy New Year for steel producers and for consumers that are well stocked at the end of the year.

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