All three countries are currently working on ratifying the new USMCA trade deal. Canada and Mexico had both insisted previously that the tariffs be lifted before the trade deal was implemented.

In addition, the US and Canada will drop all pending litigation in the World Trade Organization related to the tariffs, set up measures to prevent “unfairly subsidized and/or dumped” steel and aluminum and prevent the transshipment of those products, and make an “agreed-upon” process for monitoring the trade of steel and aluminum.

Mexico announced in a separate statement that it will also remove retaliatory tariffs against US goods and cease pending litigation, along with implementing measures to stop unfair trade practices in the steel and aluminum markets.

The Trump administration said it plans to send paperwork to Congress to set up a vote on the USMCA before lawmakers adjourn in August.

The global long steel products market is currently in a positive mood amid good demand worldwide. Had there not been protectionist actions like additional tariffs, quotas or safeguard measures, the global business scenario would be much better. Protectionism is like a virus, expanding and hurting the international trade environment as we knew it.

Canada and Mexico follow the US and also jump on the protectionist bandwagon

In the Americas, after the US, Canada has also got on the bandwagon though not with the same intensity, and now Mexico has announced that it will be reinstating the 15 percent duty on steel imports. Demand in all three countries is strong, but the benefit goes to domestic mills only.

Canada and Mexico expected to eventually sign USMCA agreement

It seems that Canada will be the first to sign the USMCA (the new NAFTA) agreement, if they agree to a quota to replace the tariffs. Politics in both the US and Canada could delay this: however, it appears that the earliest resolution could happen by late summer. Mexico’s signing of the agreement may be delayed months after the signing by Canada.

US and China appear to be moving closer to a trade deal

On the other hand, the negotiations between China and the US seem to be improving as we read reports saying that they are getting closer to a trade deal. Obviously, the markets in China and Asia are all awaiting news on the China vs US feud.

EU quotas boost domestic markets, strengthening dollar discourages imports

The recently implemented quotas in the EU are having a very positive effect on the EU producers’ capacity utilisation and increasing their margins significantly. In addition, with the US dollar gaining strength against the Euro, imports are even getting less and less attractive which further improves EU producers’ advantage in the market.

Exporters continue to suffer amid uncertainties in the global market

Both US and EU mills still enjoy good business in their respective domestic markets with margins like never before thanks to the tariffs and safeguard measures in place. However exporters continue to suffer due to the uncertainties in the global market. The market players who benefit from fair and free trade are suffering because of protectionism and the current political mood.

Demand for ferrous scrap has recovered since the start of the year

The European, US, Chinese markets are all performing well with strong domestic demand for steel which drives scrap demand. Accordingly, demand for ferrous scrap has returned since the beginning of the year. After seeing bottom levels in December, the long steel products market has started moving in an upward direction since January and is also supported by raw material prices.

Turkish long product steel mills continue to suffer

The global steel market is indeed characterized by a positive mood at the moment, but the Turkish long product mills are still struggling because of protectionism in the global market and the lack of domestic consumption.

Turkish suppliers face shrinking export opportunities

Not many markets are left in which Turkish exporters can conclude business, as both the US and Canadian markets are closed because of duties, and the new quota regime makes it difficult to do business in Europe. The GCC and Far Eastern markets are also out of reach to Turkish suppliers for the moment because of the price gap. The remaining target markets are Central and South America, North and South Africa, Israel and Yemen, but the volume that can be generated from all these countries is quite limited.

Steel mills’ margins still positive though not as good as last year

The good news is that most steel mills globally have positive margins despite all the ups and downs, even though the margins are not as good as last year. Also, despite the increase in iron ore prices, scrap prices have not moved up at the same rate.

Good domestic demand in China continues to keep Chinese exports in check

Chinese exports are still being held relatively in check thanks to good demand in the Chinese domestic market. No downward price trend is expected in the short run in China due to the additional state support for the market. Also, the outlook for a deal with the US will help to keep the Chinese economy on an increasing GDP trend. Expectations for China and the US to reach an agreement on trade tariffs toward the end of March have been driving the financial markets for some time.

Strong competition exists in the international markets not blocked by protectionism

Competition is limited and moderate in most markets due to protectionism, tariffs and quotas. The markets are having to adjust accordingly as the playground is smaller now. There is strong competition in those limited number of markets which are not closed to international market players by protectionism.

Outlook for global longs market still satisfactory despite ongoing instability

The current status of the global long steel products market is perceived as being mostly unstable due to the aforementioned reasons. Having said that and despite all the existing issues, the outlook is still satisfactory, even though it remains challenging.

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Finance minister Morneau’s spokesperson Pierre-Olivier Herbert has stated that the changes were made in recognition of Canada and Mexico’s mutual rights and obligations under NAFTA. Meanwhile, steel imports from other countries that do not have free trade agreements with Canada will continue to face safeguard measures.

According to CBC News, Canada’s emergency safeguard measures on seven categories of steel imports, with two of them being imported from Mexico, began last October to prevent dumping of steel in the Canadian market after the US decision to impose 25 percent tariffs on steel imports. Mexico strongly opposed this decision and the tension between the two countries restrained the NAFTA revision process, with both countries failing to convince the US to lift its steel and aluminium tariffs.

There is huge uncertainty in the global long steel products market as there are a lot of unknowns against the backdrop of protectionist measures and price corrections.

US-China ceasefire may reduce volatility in international market

The trade dispute between the US and China has been kicked down the road for another 90 days. The ceasefire in the trade war between China and the US can contribute to a steadying of nerves and to reducing volatility in the international markets. At least, the latest trade dispute deferral may be a positive break for the next 90 days.

US tariffs likely to remain in place for the time being

Canada and Mexico signed NAFTA 2.0 (USMCA) with the US and still have Section 232 duties at 25 percent. The 50 percent duty on Turkish exports to the US still stands despite the recent developments in the political arena. The US Congress is not going to vote on the new USMCA agreement until after the Democrats take control of the House of Representatives. This means tariffs in North America will stay at 25 percent and, most likely, that the duty on Turkish exports to the US will stay at 50 percent.

Year-end destocking to increase pressure on prices in US

Meanwhile, the year-end is getting closer and almost all stockists in the US are trying to lower their inventories. The pressure on prices increases during this process. US mills are not as busy and have shorter waiting periods for deliveries. The same problems are expected to linger throughout the month.

Uncertainty surrounding EU safeguard measures adds to market unpredictability 

The European Union is expected to announce a safeguard measure in the way of country-specific quotas, maybe per quarter. However, the uncertainty surrounding this situation is making the market unpredictable. New rumors are popping up every day as there is no proper and practical treatment of the issue. It seems to be a very politically-driven process.

Inventory adjustment also impacts European market 

A general event this time of the year is inventory adjustment ahead of the New Year period. This has been vivid in 2018 in Europe where the auto industry has slowed considerably in a short period of time, adding uncertainty over demand in 2019.

Turkish mills face difficulties on several fronts

According to a US presidential announcement, the reason for imposing a doubling of tariffs on Turkish exports to the US was the sudden devaluation of the Turkish lira, a reason which is now no longer valid. At the same time, Turkish exports to the US are down by about 55 percent, a far sharper drop than seen for the exports of any other country.

However, the US market remains blocked for Turkish exports. On the other hand, the prevailing prices in the Far Eastern market are now below the cost of production for Turkish producers. On top of these issues, domestic consumption in Turkey has almost stopped and the hit coming from vanishing domestic consumption is very hard on mills. As a result, Turkish mills are not left with much option but to suspend production in the coming months.

Turkish economy expected to contract in 2019, trade measures may be imposed

The markets have deteriorated considerably following Turkey’s economic slowdown. The Turkish economy is now expected to contract for the coming year. The steel and scrap markets will have to accept the impact of this on larger regions for an extended period. Iranian exports to Turkey are also adding to the pressure on Turkish producers, and this development could cause trade measures to be implemented in Turkey also.

Remarkable reversals in steel prices seen since August 

Remarkable reversals in the prices of steel products have been observed since August.  Ferrous scrap prices in Asia have fallen by US$50/mt in less than two months. Available supply cannot be sold profitably. The strong price corrections observed in the market suggest that global business is worsening; however, ferrous scrap and iron ore prices have also indicated corrections, and so the final impact on spread levels should be seen in the coming weeks.

Strength of Chinese steel demand still remains key issue

The key issue for the short term still looks like demand in China. If demand in the Chinese domestic market turns out to be good enough to prevent Chinese mills from being aggressive in the export markets, then spreads will reach an equilibrium at reasonable levels. Otherwise, we will see Chinese exports trying to reach various markets protected by many trade barriers and the consequence will be more pressure in the global market. That said, the situation in China still gives us enough reason to be optimistic for 2019.

Real economy developing better than some previous forecasts

The real economy is developing better than some pessimistic predictions had indicated. No dramatic hike in interest rates seems likely in developed countries while oil prices are lower now, and these factors are also positive indicators for the steel market.

Prices in EU and US considered to be stable

The EU market is strong and solid, while prices in the region are considered to be stable. It looks like interest rates will not increase further, which is good news for the euro. Prices in the US are also considered to be stable.

Build-up of scrap-melting EAF capacity in China is a positive development

The build-up of scrap-melting EAF capacity in China is another positive development, but yet again we are a tweet away from knowing something new or from facing a new situation.

Competition in global market generally becoming stronger

Amid all the aforementioned circumstances, competition in the global market is increasing and getting stronger in general. It has slackened only in certain regions due to the plentiful number of trade barriers, and also in some other regions because few can compete without incurring losses. Chinese mills still do have margins and so competition with China could increase quickly.

Less-than-satisfactory outlook exists for market amid uncertainty and high volatility

The market can be defined as unstable at the current juncture with a less-than-satisfactory outlook due to uncertainty and extreme volatility.

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The global long steel products market is expected to see some stability in the short term after the US imposed tariffs on steel imports from June 1 on the European Union, Canada and México, which were all exempted from the tariffs during May. The Section 232 measures are now the same for the EU, Turkey, Canada and México, but the uncertainty in the market has not completely disappeared.

US likely to import more steel in 2018 than in 2017

It is highly likely that overall there will be more steel imports arriving into the US in 2018 than in 2017. So far, US steel consumers tend to pay the higher steel prices, 25 percent more since June 1. Canadian, EU and and Mexican exporters have already informed their customers in the US that they will have no choice but to add the 25 percent to the FOB value, and no order cancellations have so far been heard. Steel consumers in the US pay more and become even more uncompetitive with their  finished/assembled products. Obviously, NAFTA inefficiencies are automatically going to occur as the free trade in the NAFTA area had created efficient use of capacity. The new situation will cause rises in prices and as well as resulting in some shortages and late deliveries.

Nearly everyone ends up losing due to US measures, including US consumers

The only winners out of the Section 232 decision are shareholders of US steel and aluminum assets in the short term and the losers are everyone else including US consumers who will pay for all of it. The American tax payers and consumers will be carrying the bill. Canada, México and the EU have all notified the WTO of their opposition to the trade tariffs. Mexico has already imposed tit-for-tat countermeasures, as will the EU and Canada later in June.

US mills expected to raise prices in coming period

Demand in the US is the same as in past months, but supply is somewhat limited especially for certain sizes in some areas. Domestic prices offered to most large purchasing customers are lower than import prices due to imports from the EU and México being subject to the 25 percent tariff. The short window of opportunity to import from the EU has already been closed. Now that there is a level playing field for all imports, US domestic mills are expected to adjust their prices so that they are in line with or are a bit higher than import prices. Until then, uncertainty still exists and is holding buyers back from making long-term decisions.

Relief for Turkish mills as they now share level playing field with EU, México and Canada

Of course, the US decision is a relief for Turkish mills who were not exempt from the tariffs during May. With Europe, México and Canada all being on the same level playing field, this will strengthen the competiveness of Turkish mills and bring them back to the US import market, which in turn will also bring the Turkish mills back to the scrap market. As already mentioned, it is highly likely that we will see a further increase in US domestic reinforcing bar sales prices in the next few weeks, which may put pressure on international scrap prices and subsequently on the production costs of the Turkish and European mills. This situation may also lead to a rebound in apparent demand for steel products, linked to the possibility of further price increases, as happened when the sudden increase in graphite electrode prices pushed up production costs and prices last year.

Customers taking time to decide on purchases as everything seems possible with Trump

There are strange rumors in the market suggesting that Canada could have a reduction in the tariff. Since everything seems to be possible with the Trump Administration, customers are taking their time to decide where to buy.

Bottom may have been reached in terms of prices amid slowdown of oversupply

Whether the market overcomes the 25 percent tariff issue is uncertain. We could end up with higher prices and lower output, or more output and lower prices. Recently, oversupply in the global market has been slowing down and it is highly likely that we may have reached the bottom in terms of prices.

EU safeguard investigation adds to uncertainty

On the other hand, there is apparent confusion in the EU as regards safeguard measures. The EU needs to import as well, and the EU authorities are well aware that their action may trigger a domino effect as has already been seen in Turkey, which in fact also needs to import steel products.

In spite of everything, outlook for next quarter appears satisfactory

Competition in the global long steel market has lately been moderate and reasonable. The market is deemed to be mostly stable even though there are some fluctuations in certain areas as well as uncertainty as the effects of the Section 232 measures are difficult to foresee. Having said all that, the outlook for the next quarter is satisfactory.

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According to media reports, Lighthizer told the Senate Finance Committee that the Trump administration would base exemptions on “a certain set of criteria” while continuing to negotiate.

Canada and Mexico were also excluded from tariffs on a temporary basis while Lighthizer continues to renegotiate NAFTA.