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

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

On the last day of the conference, producers of long steel products, as well as traders and raw material suppliers, shared the conclusions reached at their special committee meetings regarding the current situation in the markets with the general participants at the event.

Raw Material Suppliers at IREPAS: Lower scrap demand prevails in market, except in South Asia

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A balance has been maintained between supply and demand in the global long steel products market, but it is still difficult to transact business globally. However, shorter-distance regional business is good. The global market can be described as mostly unstable, with only a few exceptions.

Absence of Chinese still provides support for the rest of the world

We have to take into consideration that China has been largely absent from dictating the global steel market since the end of 2015. Chinese domestic demand, from which Chinese steel producers are making money, is suppporting the rest of the world. Local production is increasing almost everywhere. The traditional importers of the past have become exporters – the UAE and Qatar, for example, just to name a couple.

US domestic mills reap the rewards of protectionism

In the US, prices did come down some, reflecting the movement of scrap prices. Since all domestic prices are below logical import prices with the Section 232 duties added, imports without special exemptions are not working out. There are not any exemptions for reinforcing bar and wire rod imports. There is talk in the White House of spending a trillion dollars on infrastructure, but no word on where the money will come from. It, therefore, may take a long time for this to become a reality, even for half of the discussed amount. When it does happen, the windfall will be for domestic mills – who disclosed mega earnings for the last quarter without such projects – as almost all such projects will be subject to a “Buy American” clause.

Demand in Europe not brilliant but stable

The market has been quiet in Europe due to the Easter holidays and the general market situation in the region has not changed. Safeguard measures help maintain the equilibrium between supply and demand, with the latter not brilliant but stable. Lately, we see that EU producers are active in the export markets in order to ease domestic pressure. However, it is not possible for European exporters to match the prices in the markets which not affected by protectionist measures.

Turkey is the country most impacted by protectionist measures

In other places around the world, domestic business is still moderate, though exports are under pressure due to trade remedies. Turkey is the most affected among all countries, with a 15 percent drop in liquid steel output and a drop of almost 50 percent in rebar production. The prevaling protectionist measures do not allow Turkish exporters to reach their main export markets. The latest news is that Malaysia has also decided to pursue an antidumping case.

Turkish rebar exporters to be further impacted by EU quotas issue

Turkish rebar exporters could use the import quota allocated by the EU to “other countries” for the last 90 days of the first half of this year; however, the next quota period will run for 360 days, while the quota allocated to “other countries” will not be made available to Turkish exporters until the last 90 days of this period. That will certainly have a further impact on Turkish rebar exports.

Spring gives boost to steel output and scrap demand, Turkey’s situation puts pressure on scrap

The spring period is driving steel production and demand for raw materials in Europe and the US. However, reduced Turkish domestic steel demand is putting pressure on ferrous scrap.

Strength of Chinese domestic demand remains of critical importance

It is highly critical that the production and consumption figures in China are all up, and likewise prices. Chinese domestic demand remains strong, which reduces China’s steel exports. However, it is of the utmost importance that the Chinese domestic market should keep internal demand active and continue consuming steel at the same speed in order to prevent a flood of exports arriving into the global market. In particular, the Chinese being largely absent from the export markets allows other countries like Qatar and Turkey to stay in the Asian markets.

Regionalization of steel trade is a positive factor for pricing

The regionalization of trade is positive for pricing despite the obvious problems of protectionism for the consumers. It also poses a challenge for Turkish steel producers when the Turkish domestic economy is contracting.

Competition heats up in limited export markets

The competition in the market is getting stronger due to limited export markets, and as new cases of antidumping appear. Turkish exporters are competing with everyone in the markets which are still reachable for them. On the other hand, it is difficult to compete from long distance and then safeguards and tariffs do the rest.

Outlook worsens and fears of economic slowdown gain ground

Demand is still good but the outlook is worsening in line with general international sentiment and unpredictability regarding new trade wars and measures. The US market is losing steam and so is the scrap market.With a steel asset build-up in multiple areas, the scope for large-scale international trade may be affected in the longer term. Fears of an economic slowdown are gaining acceptance and risks of continued trade barriers restrict the outlook.

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Prices in the global long steel products market are better compared to our last report, though there is a certain degree of uncertainty regarding how sustainable the current price levels are. The situation has gotten worse generally in terms of demand and supply, as there seems to be a general worsening of expectations and the numbers coming in do not bode well.

Brazilian dam accident pushes up iron ore prices

Scrap prices have again started to increase slightly, which means the recent improvement in long product prices has no positive effect. Iron ore prices have risen due to several force majeur declarations following the dam collapse in Brazil.

Turkish mills maintain rebar production at low levels

Turkish mills have reduced their production considerably and at the same time the sudden increase in scrap prices has pushed up their rebar prices. If Turkish rebar production continues to run at low volumes, then it will be difficult for scrap prices to continue at their current levels. If production increases, then we might see another drop in rebar prices.

Margins still better than average in US where there is not much room for imports

Margins have been reduced in the US, but they are still better than average. With lower domestic prices in the US and the 25 percent tariff, there is not much opportunity for import trade.

EU market faces many uncertainties

Many in the EU are very much concerned about a hard Brexit, the ongoing trade wars, the potential impact of the recently introduced safeguard measures, the American market situation, exports from Turkey, the GDP forecast in Germany, the expenditures of the new government in Italy, etc. If Germany is to correct its GDP growth forecast from 1.8 percent down to 1.0 percent, then other EU markets may follow suit. German stocks are also under pressure, which does not encourage a positive outlook for the EU overall.

US and EU markets expected to improve pricewise

Having said all the above, the US and EU markets are expected to improve pricewise. However, we need to wait until the Chinese New Year holiday is over to see where the rest of the world will be heading.

Less pressure from Chinese supply, but what will happen after the holiday?

There is obviously less pressure on the market from Chinese supply offers due to the somewhat higher prices offered and the Chinese New Year holiday. Chinese origin steel prices are very high and not competitive for the time being, giving suppliers of steel from other countries the chance to fill the gap. Chinese exporters usually push up their prices after the New Year holiday, and so we will have to wait and see what move they will make after the holiday.

Temporary end to US government shutdown is welcome, but other issues remain

The US government shutdown is temporarily over, which is good news, but there is still no mention of revoking the 25 percent and 50 percent Section 232 duties which were imposed citing the defense of US national security. Perhaps an agreement may be reached by President Xi and President Trump by March 1, which would obviously be positive news.

Industrial output recovery after year-end provides a boost

Industrial output has recovered after the end-of-year slowdown, and sentiment seems to have improved somewhat, and global growth, although slightly lower, is still pacing at decent numbers. 2018 saw strong production development in most regions, apart from Europe and Turkey.

Scrap prices show clear rebound from bottom levels in early January

Restocking and the industrial ramp-up to normal levels have been strong during January and, with winter drawing down scrap flows in the northern hemisphere, scrap pricing development saw a clear rebound from the bottom during early January.

Competition generally at high levels and heating up further

Competition in the market is high as usual and is even heating up further as we can see. Ukrainian suppliers have been exporting rebars to the Far Eastern market for the first time in a long time, competing with exports from Turkey and Qatar. Elsewhere, competition is slackening in the EU market. EU mills are expected to set their goals in the coming period and will start dictating prices sooner rather than later. With the continuation of trade restrictions, the global trade will see further suboptimal effects.

Current market characterized by instability and uncertainty

The current status of the market can be described as unstable given the uncertainty caused by Brexit, the government shutdown in the US, the situation in Venezuela, the Chinese New Year holiday and the difficult winter conditions in North America and the north of Europe. The scrap market outlook and the future of ex-Brazil iron ore only adds fuel to this uncertainty.

Difficult to make predictions: Implementation of EU measures and post-holiday period in China need to be watched

Under these circumstances, it is pretty difficult to make any predictions for the market. The picture will become a little clearer with the full implementation of the measures in the EU and the end of the Chinese New Year holiday.

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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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Interview with Traders Committee Chairman Mr. Michael Setterdahl :

The opening session of the conference continued with the following presentations:

Keynote Speaker: Kim Marti Subirana, CELSA Group Commercial Director
Global macroeconomics and long steel products market
SESSION ONE – GCC and MENA long products markets

Saudi Economy and Steel Markets; current situation & future outlook
Adel Al-Mughram, Senior Marketing Manager, Long Products, SABIC

MENA Markets Summary Forecast, Markets & Steelmaking
Juma Al Mansouri, Assistant Vice President Emirates Steel

North African Industry
Hadi Hami, General Manager, Norecom Group

The 68th meeting of IREPAS (International Rebar Exporters and Producers Association) was held in Doha on March 3-5, 2013. There were 76 producer representatives amongst the 210 registered delegates from 60 different countries.

Yusuf Guven, chairman of the IREPAS Raw Material Suppliers Committee, said that the iron ore inventory strategies implemented in China resulted in increased iron ore prices. He went on to state that China has been importing scrap from the US in line with the uptrend in iron ore prices and, because of this, some scrap availability issues have been seen in the rest of the world. Contrary to the usual seasonal winter situation, scrap inventories have not been available at US ports this winter. Also, domestic scrap prices in the US have moved upwards by $20-40 per ton.

Mr. Guven added that an increase in scrap consumption has been observed in Europe, while demand for steel is expected to remain strong in Turkey. He stated that it is not possible to say scrap is in short supply when looking at the global situation, noting that a certain supply and demand equilibrium exists in the market.

In conclusion, the chairman of the Raw Material Suppliers Committee told participants at the Doha meeting that there are no expectations of high volatility in scrap prices globally, while greater pressure may be seen on prices since scrap consumption is increasing.

Michael Setterdahl, chairman of the Traders Committee, stated that customers worldwide currently prefer to keep their inventories at low levels and to maintain a “sit and wait” stance. “With improved political stability, people will think more optimistically, and when they think like this they buy more steel,” he added, underlining that the trends in scrap and iron ore, coking coal and natural gas are key when watching the global markets. In addition, shortages of electricity, in China for example, should be observed.

The chairman of the Traders Committee also remarked that the economic situation is ready to take off.

Mr. Setterdahl concluded by saying that it is good to see no negativity in the MENA region, while trade between the GCC countries has increased and so the supply and demand situation is more balanced in the region; however, he added that it is unclear whether this situation is permanent.

Ugur Dalbeler, chairman of IREPAS and of the Billet Suppliers Committee, stated that in 2012 the low trend of iron ore prices put pressure on flat product prices. As a result, producers preferred to produce billet rather than slab if they had the option. Even some blast furnaces in Brazil reduced capacity in order not to produce more slabs. Therefore, more billets and less slabs were produced overall in 2012, while in 2013 the expectation is for a significantly reduced
billet output. Mr. Dalbeler said that the committee does not believe that scrap prices will go down and, as steel billet prices seem rather stable, this situation puts pressure on producers.

The IREPAS chairman also said that electric arc furnace-based producers and even integrated mills will either have to raise their prices or they will have to consider reducing their production. In conclusion, he stated, the committee’s view was that, although 2013 seems set to be characterized by sideways price movement, it will definitely be a better year than 2012.

Kim Marti Subirana, chairman of the IREPAS Rebar and Wire Rod Suppliers Committee, stated that 2013 started slower than expected but added that the year will be better than last year as the long steel products market will gain momentum. Business in the Middle East is looking good on the back of ongoing projects, while new projects are also being started. The committee chairman pointed out that new production capacities in the Middle East are on the way and that everything seems under control.

“The Turkish long steel market seems strong with new projects and demand, the Asian markets similarly appear strong, while the situation in Africa is relatively good,” he added. Business in Libya is slow at the moment but the country shows some limited signs of improvement and it is back in the game. Egypt, on the other hand, Kim Marti continued, has been experiencing some restrictions in relation to the US dollar, but business still continues in this country. Although Brazil had been expected to perform better than it actually did, the situation in this country still seems positive, as does the situation in South and Central America. Regarding North America, the committee predicts a good year.

The committee is optimistic regarding 2013 as general demand looks good globally. However, the committee also discussed import restrictions in certain countries, notably in Egypt and Morocco, which constitute a cloud in an overall clear sky.

The emerging markets continue to be important in rebar consumption, Mr. Marti added. He stated in conclusion that long steel product volumes are looking for new markets and this is putting pressure on the markets in question. “We need to correct the supply and demand balance in order not to place pressure on markets,” he said.

Notes to Editors:

IREPAS is a global association of producers and exporters of long steel products. It was founded by CELSA and GERDAU 30 years ago to develop understanding between producers, traders and consumers around the world. Today, IREPAS unites producers, traders, consumers of steel and professionals from the shipping and finance industries.

Accordingly, Qatar has banned imports of reinforcing bars below grade 500, and made mandatory a labaratory test report to import the construction steels.

The Ministry announced to accept only those issued by the ISO 17025-certified laboratories with three month validity as well signature and seal of the laboratory. In case the test report is issued by the supplying steel producer’s own laboratory, same must be approved and ratified by an internationally recognized third party.