During the review period from July 1, 2020, to June 30, 2021, Turkish producers were found to have made sales of the subject products at less than normal value. Additionally, the US DOC preliminarily found that Habas made no shipments during the period of review, though it will not rescind the review with respect to the company.

The US DOC has determined weighted-average dumping margins of 1.13 percent for Colakoglu, 5.79 percent for Kaptan Demir Celik, and 3.92 percent for Diler Dis Ticaret, ICDAS and Sami Soybas Demir Celik.

The supply and demand situation in the global long steel products market has deteriorated as global economies are doing much worse today thanks to protectionist measures and the Covid-19 pandemic. There is oversupply of almost everything, except those items that suddenly end up being in short supply due to impacts on the supply chain. This does not include ‘shortages’ that are due to consumers not being able to afford the asking price and preferring not to buy at all.

More output cuts possible in May

Many mills were able to manage the situation in April thanks to orders received in February, although lots of them reduced output. We may see more output cuts in May as the lockdowns will probably continue until June. The negative impact of the lockdowns on the overall economy should also be felt by the steel industry.

Situation in Brazil deteriorates

In Brazil, the situation has gotten worse because the main markets like the US and the EU are still in the middle of the crisis. Brazilian mills are operating at only 41 percent of capacity and the drop in April sales will be 50 percent, according to IABR. Also, the steel sales forecast for the second quarter is for a drop of 40 percent compared to the first quarter, while a drop of 20 percent in sales may be seen this year compared with 2019.

Depression highly likely in EU following lockdown

The supply and demand situation has worsened in the EU, also as demand for EU products is declining since a majority of the world economies are on lockdown. It is highly likely that the EU will experience a depression after the lockdown and that many insolvencies will be observed as banks and credit insurance companies are not able or not willing to support the needs of the economy by lending cheap money and maintaining coverage limits. On the contrary, the majority of them have already started to cut back to protect themselves. Unemployment in the EU may reach the levels seen back in 2008 and 2009.

US also faces worsening crisis, steel pipe and oil tool segment hit hardest

The situation is worse also in the US market. There are too many suppliers willing to sell even at cost level in order to carry on, even though there are not many opportunities left. Domestic prices are similar to the prices of imports from Mexico or Canada and cheaper than those from the countries subject to Section 232 duties. Although construction projects are considered essential, states in the northeast have mostly been closed. Construction in the US was slow in April and it looks like May will see only a minor improvement. Credit insurance companies were faster than any of their users in cancelling or reducing credit insurance for all steel-related companies, thus adding fuel to the fire. Oil prices have sunk to historic lows, creating a serious negative outlook for the whole steel pipe and oil tool manufacturing industry. Many companies are expected to downsize or to become insolvent in the US oil-producing states, particularly in Texas. This will negatively affect commercial building, housing construction and even auto manufacturing in the US.

Scrap-based steel segment seems to have fared better during the crisis

Scrap-based steel industries seem to have fared better during the crisis. Blast furnaces have in many cases been idle as a result of the closures of the automotive sector in Europe and the US. Long steel production has been continuing at relatively decent rates. Scrap availability has been heavily reduced during the lockdown period. The markets held up somewhat in April as a result of lower raw material availability and the backlog of orders. May will see low industrial activity and possibly limited demand for finished products. This could be mitigated by Europe and the US reopening gradually in May.

Signs in some regions that markets could reopen sooner than expected

When we see the end of the Covid-19 pandemic, we will see more demand and an increase in business activities that might boost market conditions. There are signs in some regions that the markets could be open sooner than expected. The Far Eastern markets seem to be getting back to normal. It is also a good sign that people in Western countries may be back out on the streets by June or July. Governments will surely focus harder than ever on how to stimulate their economies. China opening up and stimulus activities throughout the world will buoy the markets for some time when the reopening takes place.

China is recovering rapidly, mainly in construction, active in billet imports

China is recovering rapidly, mainly in the construction sector, which is boosting the demand for rebar and billet. Chinese steel exports are still under control. In fact, Chinese companies are active in the market importing billets.

Construction in EU could be a focus for economic stimulus

The construction industry in the EU is still doing fine and it may be a target industry if the EU or individual European governments want to stimulate the economy. Domestic production both in the EU and the US has been reduced due to the temporary closure of some steel mills. This may help stop the further erosion of prices.

Long products perform better than flat products

Long products are faring better than flat products. In fact, the market circumstances were not bad between October 2019 and April 2020. The volumes are the problem for the time being.

Competition depends very much on the region, tough for producers

Competition in the market depends very much on the region and from which angle we view competition. From the producers’ point of view, competition is tough since demand is low and almost all producers are after what is available in the market. Thus, competition is still high since the buying regions are so limited. In fact, the only active market is China, which is importing semi-finished products. But from a general perspective, there is not much competition for the amount of global trade.  For instance, the level of competition within the EU market is declining, with closed borders even inside the EU, and very high transport costs from certain regions. Also, there is much more protectionism preventing imports anyway.

Outlook for the next quarter may be described as unstable

The current status of the market can still be described as unstable and unpredictable. Steel producers will probably recover quicker than demand, which may put pressure on pricing in the market. Hence, the outlook for the next quarter may also be described as unstable taking into consideration the lack of demand and low prices, even though at the same time the outlook is for an improvement on the current situation.

International business may be further restricted by additional protectionism

The world may be restricted even more as far as international business is concerned. We may see more protectionist decisions. The European Commission is already considering lowering the quotas for steel imports. Every country will try to protect what is theirs, meaning tougher protectionist measures. Exporters will feel more pressure with the declining international trade volumes, especially in the markets dominated by Russian suppliers who have no concerns about raw material or energy prices and who have the cheapest production costs. Therefore, overcapacity will probably be more of a domestic subject rather than a global issue.

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On the last day of the conference, producers of long steel products and steel billets, 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: Scrap demand will return within a few months

Jens Björkman, the chairman of the IREPAS Raw Material Suppliers Committee, said that iron ore pricing has been more stable lately. He added that the slowing growth in China is increasing pressure on capacity utilization and is also weighing on steel prices. Having that said, the raw material suppliers believe that the market is in a better position in terms of exports from China.

Regarding the scrap market, the raw material suppliers committee’s findings indicate a relatively stable market and the committee expects demand to return within a few months. Mr. Björkman said that scrap inflow in the Western world, namely, in the EU and the US, is down by around 20 percent this year compared to 2015, thereby affecting the profitability of recyclers. He also stated that the high value of the US dollar is putting pressure on dollar-based scrap pricing, while US domestic demand has dropped and this is the main factor causing the decline in scrap prices.

Commenting on the international trade, the IREPAS Raw Material Suppliers Committee chairman said that Brexit resulted in the weakening of the pound, which opened the way for more exports coming from the UK. On the other hand, Turkish scrap trade has lately become more based on prompt shipments, while Russian scrap exports have declined sharply since domestic demand in Russia has improved. He also stated that the financing of the scrap trade is better in Russia, while, in the case of Turkey, banks were hesitant in the immediate aftermath of the coup attempt in July this year. He also commented that the recent rating downgrades for Turkey might impact financing as well. Mr. Björkman stressed that, with the last quarter of the year just around the corner, many suppliers are not interested in holding stocks.

In answer to a question on Ukraine’s scrap export tax,  Mr. Björkman said that exports from the country have diminished and the supply from the Baltic region has compensated for the loss of supply in some regions, adding that Turkey might need to book larger deep sea cargoes and this would mean a riskier operation for the Turkish steel industry.

Traders at IREPAS: Possible antidumping duty on Turkish rebar imports into the US is likely to increase pressure on prices

Representing the IREPAS Traders Committee, Wilhelm Alff from Duferco affirmed that traders are also concerned by the recent antidumping filing by the US-based rebar producers, pointing out that the quantities of imports are much higher compared to the previous filings. The traders committee expressed the view that Turkey has to find an arrangement with the US administration to continue rebar exports, otherwise “they need to find a new home which will increase pressure on market pricing”, said Mr. Alff. He also stated that the reason the US rebar importers choose Turkey as a supply source is not only price; he said that, besides being competitive in pricing, Turkey is also capable of meeting every specific type of requirement the US reinforcing bar market needs, which most other suppliers are not able to do.

Commenting on China, the IREPAS Traders Committee chairman said that capacity reduction is not everything; the bigger problem is the excess production which is creating a huge disturbance in the market. He stated that closing the mills is a very political issue; the potential loss of employment as a result of the closures will create a headache for the administration. The committee chairman also indicated that, even if China is granted market economy status, it will not change a lot for the industry except for trade cases which becomes more difficult for applicants.

Answering a question on whether the failed coup attempt in Turkey has had any effect on business, Mr. Alff said that he has not experienced any doubts on the customers’ side regarding Turkish supply, other than concerns about deliveries within a few days of the coup attempt; otherwise, it has been business as usual.

Steel Producers at IREPAS: Market conditions are more stable

Murat Cebecioglu, the chairman of IREPAS and also of the IREPAS Producers Committee, commented that in general the market conditions are more stable compared to previous years, while market players from the GCC countries are a little bit more optimistic than their EU counterparts. “Things are improving slowly but surely,” he added.

Mr. Cebecioglu said that trade protectionism is a significant issue for export-dependent countries, since competition is getting tougher and the pressure on exporters is increasing. He expressed the belief that export destinations will become limited and producers will have to find new places to sell their products. He also commented on the US antidumping filing on rebar imports, recalling that three years ago the same trade case resulted in zero margins. He went on to say that this time it is political, adding that the petitioners always change the method by which they calculate margins; however, he still expects the US producers’ coalition to come up empty-handed. He said he is confident that his company does not sell dumped goods to the US, while also stressing that the Turkish industry is certainly not subsidized.

In answer to a question regarding the granting of market economy status to China, the IREPAS Producers Committee chairman said that the decision makers have to think twice, adding that, if China is granted market economy status, trade measures will become more difficult. Mr. Cebecioglu stated that he considers it is too early to talk about the effects of Brexit in terms of international trade, but he hinted that Turkish mills might benefit from it.

At the opening of the SteelOrbis 2016 Spring Conference & 74th IREPAS Meeting held in Lisbon on April 10-12, Kim Marti, the international sales director of Spanish steel producer Celsa, handed over his duties as chairman of IREPAS, the global association of producers and exporters of long steel products, to Murat Cebecioglu, export manager of Turkish steelmaker ICDAS.

During his first speech as IREPAS chairman, Murat Cebecioglu stated that global economic problems continue to challenge sustainable growth in many areas of the world. “We can say that steel industry has been responding very successfully to the challenges caused by the current economic situation. Recent developments have changed the outlook and boosted prices,” the new chairman remarked.

Speaking at the event, outgoing chairman Mr. Marti said that things have changed in the last few weeks in the steel industry, with the industry seeing a big turnaround and heading for a healthier new balance. Mr Marti mentioned that in 2015 the steel industry reached the end of a major growth cycle which was based on the rapid economic development of China. He pointed out that the industry is at or has even passed the lowest part of the cycle, and that the time it will take to get back to a more reasonable business environment will depend exclusively on how quick restructuring actions are taken.

Mr. Marti indicated that the slowdown in demand in China has been remarkable, pushing down prices of steel and iron and prompting Chinese mills to target increased overseas sales, boosting trade tensions and causing the financial performance of many producers around the world to sink to unacceptable levels. He added that, seeing what was happening in China, global steel producers reduced output in 2015 to adapt to the new demand levels. The reduction in production resulted in a decrease in utilization rates, far below profitable levels which would be at 80 percent.

On the last day of the conference, producers of long steel products and steel billet, 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: Scrap prices have bottomed out soon after Rome meeting

Jens Björkman, the chairman of the IREPAS raw material suppliers committee, said that the markets are looking a little bit better this time, adding that the general feeling among committee members is that the current conditions are a lot more sustainable and that the environment has improved a lot for business in general. He pointed out that raw material prices bottomed out soon after the last IREPAS meeting held in Rome back in October 2015.

Mr. Björkman indicated that the business environment for raw materials is healthier now due to the weaker US dollar, which has hit its lowest level in 17 months, and the Chinese government’s decision to cut capacity. The raw material committee chairman stated that the lower volume of billet exports from China gave way to increased scrap purchasing in the markets, resulting in a healthier balance between billet and scrap volumes.

According to the committee chairman, protectionism is also an important factor contributing to stronger scrap demand, adding that US domestic demand for steel products has pushed scrap prices up. Commenting on India’s minimum import price system, Mr. Björkman said that the implementation of this measure has increased scrap shipments to India and he expects that the minimum import price will be extended for another six months. He also said that the committee does not expect any sudden change in the €10/ton scrap export duty in Ukraine.

In response to a question on whether the major iron ore suppliers are trying to push the small ones out by lowering prices so that they will be able to increase their prices at will once the smaller producers are out of the way, Mr. Björkman said that the major producers are trying to keep their prices low due to their shareholders who expect higher dividends.

Traders : Iran is proving to be an exporter, not an importer as had been expected

F.D. Baysal from Seba International, representing the IREPAS traders committee, said that looking at the price environment today the traders committee believes that steel mills will likely increase their outputs, instead of reducing them.

Commenting on the Chinese government’s announcement of a 100-150 million tons reduction in steel production not capacities, Mr. Baysal said that this will not be sufficient to have any impact on the export capacity the Chinese have at hand. He went on to say that, considering the expected decline in Chinese steel consumption to 595 million tons by 2025, the planned capacity reduction of 100 million tons will have zero effect on export capacity. He also explained that what China is doing is just replacing old-fashioned mills including the ones using using coal with new ones like Baosteel is doing with its new 9 million tons per year plant, and so they will provide tougher competition with their new state-of-the-art mills.

Regarding the lifting of sanctions against Iran, Mr. Baysal said that they had thought Iran would be a good alternative market for sales, whereas Iran is instead proving to be an exporter, selling billet to the Turkish market. He added that he believed there will be more exports coming from Iran.

Lastly, he said that it is not a good time to grant market economy status to China, not yet. Although he considers that the granting of market economy status will create a level playing field for everyone, which is a good thing.  He cautioned that it will be tougher to impose these high rates of antidumping duty for Chinese producers under Market Economy.

Steel producers : Exciting times finally here after depressing period

Murat Cebecioglu, chairman of IREPAS and also of the producers committee, said that producers are finally observing exciting times for the steel industry after a depressing period and have started to see the light at the end of the tunnel.

The IREPAS producers’ committee chairman stated that the increase in Chinese billet prices and higher iron ore prices have given a boost to the markets in general. This upward movement has been backed by most of the traditional markets and domestic prices in these markets have increased as well. Commenting on the different regions, Mr. Cebecioglu said that the EU is expected to see moderate growth in 2016 with the construction industry growing at a better pace than in 2015; however, the economy does not allow it to grow at a much faster pace. Looking at the Gulf region, he said that the demand outlook remains positive with Expo 2020 in Dubai and the World Cup 2022 in Qatar.

According to Mr. Cebecioglu, 2015 was not a good year for Ukraine, while 2016 is expected to be on the positive side. Regarding Russia, he said that the country’s economy shrank considerably in 2015 and is not expected to grow much in 2016 either. On the other hand, all indicators are showing positive signs for Turkish exports and steel consumption in Turkey will be decent with many ongoing and planned infrastructure projects.

IREPAS chairman Kim Marti stated during his opening address that the main challenges the long products industry is facing are overcapacity and declining prices.

He said that in the next few months China may see a decline in steel exports because some private sector Chinese mills are experiencing financial problems. Mr. Marti stressed that steel is a cyclical business and that this could mark the turning point of the cycle. Regarding declining prices, he commented, “We are closer to the bottom.”

According to Mr. Marti, current economic conditions create both winners and losers. “On the losers’ side, we see emerging economies such as Russia and Brazil experiencing a slowdown, while developed economies such as the US and the EU are seeing an acceleration of growth,” Mr. Marti said. He went on to say that the EU economic sentiment index rose to 105.6 in September this year, the highest since August 2011, which indicates that the EU is overcoming its financial problems.

The IREPAS chairman also pointed out that Chinese economy is changing from being investment-led to being a robust, consistent economy which is based on domestic consumption, adding that he believes business has a bright future in China.

On the last day of the conference, producers of long steel products and steel billet, 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: Scrap prices have not bottomed out yet

The chairman of the raw material suppliers committee Jens Björkman from Stena Metal, said that the raw material markets were supply-driven, with a negative spiral seen in the scrap markets. He indicated that demand for scrap has followed a negative trend in the past few months, especially in Asia, pushing supply elsewhere and crowding the market.

Mr. Björkman pointed out that capacity utilization of steel mills has declined and this has affected scrap pricing since supplies have fewer destinations. He went on to say that intra-EU scrap demand was fairly steady, though it has slowed down in the past few months. On the other hand, in the EU scrap pricing was quite strong but declined during the summer period.

The raw material suppliers committee chairman said that prices have not bottomed out yet, adding that the decline in scrap prices in the US and EU is a result of lower scrap demand from Turkish mills. Mr. Björkman also said that lower prices will likely cause a reduction in scrap collection in the short term. Meanwhile, scrap supply from the Black Sea region, which is one of the main sources for some steel mills in Turkey, has dried up considerably.

Commenting on scrap usage predictions, Björkman said that scrap demand is expected to be fairly good but may be distributed over larger areas, and may not be concentrated as it was in previous years.

Traders discuss trade barriers and price trends

F.D. Baysal from Seba International, the chairman of the traders committee, said that some traders believe that there exists room for a small further price reduction, while the general consensus is that prices are at the bottom or pretty close to it.

Regarding the current situation in the US, the traders committee chairman stated that the committee members discussed whether mills are ready to produce new grades according to new ASTM standards. Mr. Baysal said that they also talked about the CARES’ (Certification Authority for Reinforcing Steels) suggestion that trading companies should be CARES-approved as well and whether this was another way of imposing a trade barrier. He pointed out that the traders did not subscribe to the suggestion. Commenting on another trade barrier, antidumping cases, Baysal said that not only the cases themselves but also the annual reviews create risks as well.

In answer to a question about whether the major iron ore producers’ increasing supply volumes constitute market vandalism, Mr. Baysal said he did not think it was market vandalism, but rather a strategy. “My belief is that when the smaller guys are out, the major producers can control the prices better. If the market turns against them, it might hurt them but I think it is a smart strategy. Once the smaller ones are out, it will be really hard for them to come back,” he concluded.

Steel producers: Global rebar demand is generally stable

The chairman of the steel producers committee and also the chairman of IREPAS Kim Marti said that there have been two significant changes in the market: Turkey has become a net importer of billets from being a net exporter and billet exports from China have increased significantly. He added that when sanctions are fully lifted Iran will probably enter the billet market, but it is not clear when.

Mr. Marti stated that the producers committee believes that the CIS and China will remain major billet exporters, though their export volumes will not indicate significant changes. Commenting on rebar demand, he said that global demand is generally stable, with markets showing differences depending on the region.

According to the IREPAS producers committee chairman, long products demand in Brazil has been negatively affected by the slowing down of the economy, also effecting the market in South America negatively, while in North America rebar demand stands at reasonable levels. Mr. Marti stated that the EU is still benefiting from lower oil prices, while demand from the construction industry in the region is recovering at the same time. Meanwhile, southern Europe is recovering, but production volumes are still low.

The committee chairman said that Turkey is the world’s second biggest rebar exporter after China, adding, however, that the export markets are shrinking in the Middle East because of political turmoil. On the other hand, the CIS markets are expected to stabilize in 2016 and exports will continue.

Raw material suppliers: Increasing Chinese exports will alter market balances

Ioannis Meimaroglou, chairman of the IREPAS raw material suppliers committee, stated that the increasing volume of exports from China due to the slowdown of Chinese domestic consumption is influencing the world market and will certainly change the existing steel trade balances. Mr. Meimaroglou said that the some members of the raw materials committee expressed the view that the threat of cheap Chinese steel exports is being used more as a pretext to exert downward pressure on raw material prices, while others stated that, if Chinese exports reach 100-120 million tons annually, the consequences will be serious, independently of whether these exports are directed to Turkey or to other countries.

Meimaroglou added that the increasing raw material demand in the market and particularly in the Arabian peninsula is creating a new situation in the region and can change the correlations on a more permanent and long-term basis. He went on to say that the considerable fall in iron ore prices has been increasing the pressure on scrap prices, adding that the strengthening of the US dollar is helping raw material suppliers for the time being, covering a part of the price fall.

Regarding scrap collection, Meimaroglu stated that the domestic markets in the US, Europe and Russia are very strong and healthy and so it is difficult to compete with them in order to collect material for export, leaving most scrap yards almost empty. He concluded by saying that the raw material market is likely to see further pressure on prices, drastically affecting suppliers’ quantities, while also adding that the direction of scrap flow may change in the future.

Traders see new possibilities for business with Iran, upbeat on Iraq and Ukraine

The traders committee chairman F.D. Baysal said that, despite the political instability in the Middle East, particularly in Iraq and Syria, shipments to Iraq are still continuing, though with some interruptions. He underlined that there are new possibilities for buying from and selling to Iran which is a new market to look forward to.

Regarding the tensions between Ukraine and Russia, Mr. Baysal stated that business is being carried on as usual, with minor interruptions which do not pose any major problems for traders. The trade flow in the region is observed to be continuing as before.

Commenting on different antidumping cases, Mr. Baysal remarked that, since Turkey is exempt from US rebar antidumping duties, rebar exports from Turkey to the US will continue, adding that the pricing may not change. He pointed out that, with China exiting the US market as a result of the wire rod antidumping duty investigation, there will be new countries entering the US market.

With regard to the increasing volumes of Chinese exports flooding the market, Baysal said that he has been always a supporter of free trade as long as it is also fair trade – speaking in response to market information that China is exporting to North Africa with 180-day credit terms, with insurance provided by a state-owned company.

Finally, commenting on raw material prices, the traders committee chairman said that iron ore prices have been declining and probably will decline further, forcing scrap prices to decline as well. Traders are looking forward to seeing lower prices, he affirmed.

Steel producers: Changing billet prices will lead to new market realities

The chairman of the steel producers committee, Kim Marti, who is also chairman of IREPAS, stated that Turkey is out of the billet market in addition to the interruptions to the business in Ukraine and that the market has been left to the Chinese mills. Mr. Marti added that the Chinese billet suppliers gaining ground in the region will put pressure on billet prices in the Mediterranean and Black Sea regions and also on scrap prices, since billets are used as a substitute for scrap. Mr. Marti, along with the other committee chairmen, agreed that certain measures should be imposed against Chinese exports.

Mr. Marti pointed out that the changing billet prices will take the industry to a new setup in the coming months, though also saying that the market adjusts quickly to new realities. Rebar demand will see a slight increase compared to 2013, Mr. Marti said, adding that the Turkish mills are happy with their domestic market and are looking forward to new trade routes opening up again to Iraq.

The producers committee chairman also said that, while the northern EU countries are performing well, the situation is less bright for southern EU countries. Italian, Spanish and Greek mills are still facing significant overcapacity under very slow market circumstances, finding the balance with exports to North Africa and production cuts. Mr.Marti added that they are starting to see signs of revival in consumption in Greece and Spain.

Commenting on the EU mills’ investments in environmental protection, Mr. Marti said that it is not something that the mills should abandon, while other committee chairmen agreed that environmental protection constitutes a social responsibility aspect of businesses and should be continued.

The global long steel products market has resumed business after the holiday period, as activity had stopped in many countries from the middle of December up to the first week of January.

The mild weather conditions in the EU have permitted reasonable levels of construction activity, which have helped to sustain a certain volume of demand in the region’s long steel market. Mills still intend to produce less, though their output will likely continue to exceed the very weak demand.

The current political turmoil in Turkey on top of the lack of steel demand has negatively impacted the country’s demand for ferrous scrap. Very significant production cuts have been reported in Turkey, and these are due especially to the extreme difficulty in making any forecasts. Meanwhile, the severe winter conditions in the US make it very difficult to operate.

On the other hand, the overall mood and expectations in the market have become brighter as the bad news from the financial sector and national debt reports of EU countries has dried up to a certain extent, and this encourages market players to be optimistic for stronger global demand in 2014.

Competition levels in the market are still very high, particularly in the Asian and the Middle Eastern markets.

The market is showing some signs of stability in certain regions such as North America and the EU, though other regions are characterized by instability.

Outlook for January

Market sentiment has improved slightly but conditions still make it difficult for players to operate with a certain level of comfort. Even though the market is still unpredictable, the outlook is positive as long steel product prices are expected to increase gradually throughout the first quarter of 2014.

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Ioannis Meimaroglu, Chairman of the Raw Materials Suppliers’ Committee, confirmed that a record high number of 42 representatives attended the committee meeting in Istanbul. Meimaroglou stated that the raw material suppliers fully understand the difficulties steel producers are facing in selling finished products under prevailing market conditions, and their efforts to reduce their costs, including the costs of raw material. He went on to emphasize that scrap suppliers are indeed trying to reduce their scrap collection prices, while adding that they are facing some major issues. First of all, he pointed to the difficulty presented by domestic market competition in any country where scrap demand increases because of the introduction of new steel capacities, or because the winter is coming, or because steel mills want to take advantage of low scrap prices.

Mr. Meimaroglou went on to say that scrap prices are influenced by prices of other raw materials, including iron ore and steel billet, which can be used – as nowadays – as an alternative when prices allow it. He said that it is impossible to achieve the greater degree of stability that scrap suppliers are seeking in order to better plan their medium-term activity. Due to unpredictable market conditions, scrap suppliers are keeping their inventories low, which in turn results in increased volatility. He also said that, when scrap prices are going down and margin expectations also diminish, a significant number of scrap collectors halt their activities, which leads to reduced scrap availability.

Meimaroglou added that official policies and regulations, especially in some countries, is completely hostile to scrap exports, aiming to limit them as much as possible. Furthermore, financing by banks – due to the general economical situation, but also due to problems which have arisen in recent years in the steel sector – is becoming more and more difficult to obtain and more limited, Mr. Meimaroglu said, adding that the dollar exchange rate is becoming an important factor in cost creation, affecting the market and competition in different areas. In conclusion, Meimaroglu underlined the general view among all participants that scrap suppliers are currently going as low as they can in terms of prices while still managing to provide steel mills with regular supplies of good quality material. “Scrap exists. But we need real workable prices, allowing us to collect and to deliver properly to our clients,” he concluded.

Representing the Traders’ Committee, F.D. Baysal said that the antidumping petition in the US against rebar imports from Mexico and Turkey has become a major concern for traders as they are worried Turkish and Mexican rebar imports to the US might stop while the investigation is being carried out. Turkish participants at the event, including steel producers and steel exporters, all stated that the dumping claim is groundless and that, even if a decision of injury is reached, dumping margins close to zero will be decided. Furthermore, the Turkish participants, including the Turkish Steel Exporters’ Association, categorically denied that any government incentives were being provided for the Turkish steel industry. Some US-based traders speaking at the Traders’ Committee Meeting expressed their concerns regarding the lack of alternative sources of supply besides Turkey, stating they could not name any supplier country other than Turkey which “can supply rebar in any size, in any grade, in any volume and at any time.”

F.D. Baysal said that traders are expecting scrap prices to go down further for a while and then to stabilize, while iron ore prices are expected to decline for longer than scrap prices. Baysal also mentioned the possibility of an antidumping investigation being launched in the US against wire rod imports.

Ugur Dalbeler, Chairman of the Billet Suppliers’ Committee, said that Turkish billet export prices have not been competitive in recent times due to upward pressure coming from scrap prices, leading to a 40 percent year-on-year decrease in Turkey’s steel billet exports so far in the current year. On the other hand, Dalbeler said that steel billet export suppliers from the CIS have more competitive prices and increased sales to Turkey as a result, also given the higher billet prices in Turkey. Dalbeler stated that the situation in the US market is now good, while the euro zone is reviving slowly in terms of steel market activity. “After a difficult year in 2013, we hope to start seeing those old good days by 2015 and 2016,” he concluded.

Kim Marti, Chairman of the Rebar and Wire Rod Suppliers’ and Producers’ Committees, stated that global rebar and wire rod demand is growing, with further growth also expected next year. Commenting that Europe is emerging from its recession and is witnessing a more positive construction outlook, which will drive steel demand higher, Marti added that the economic outlooks for the US, Europe and Japan are positive and, since these three economies account for more than 70 percent of world GDP, the general outlook for the global economy is considered to be positive. He mentioned that the European mills were adjusting their capacity carefully in line with demand, before going on to say that oversupply is still an overwhelming problem in the world steel industry, with some regions where capacities keep on rising, such as in China. Marti also said that steel markets in the Gulf region, the GCC and more particularly in the UAE are performing quite well.

He also indicated a number of challenges which the steel industry is facing, namely, volatility of prices, overcapacity in the industry, credit restrictions and trade barriers, while also stating that the steel trade is becoming more regionalized.

Demand in the global long steel products market in June remained unchanged as compared to May. There has been no improvement in terms of the imbalance between supply and demand in the market, despite the best efforts of mills to adapt their production to demand levels and thus avoid the creation of further supply pressure.

As expected and as mentioned in our press release last month, ferrous scrap prices have shown some resilience, boosting sentiment in the market. The long steel market may have already reached the bottom. The margins of mills are extremely low and, in some cases, are in the negative zone, while raw material prices have stopped their downward slide during the past couple of weeks. As Turkish demand for ferrous scrap has improved significantly towards the end of June and in early July, scrap prices have been driven upwards. A certain increase has also been observed in finished steel product prices, though remaining behind expectations as per the seasonal trend. Offers ex-China have gone up by $20 per ton in the first week of July.

Competition levels in the market are still very strong, putting steel mills under great pressure, especially with the increasing presence of Chinese origin products. Moreover, the ongoing developments in Egypt and the situation in Portugal have increased concerns, despite the recent rise in ferrous scrap prices. Turkey seems to be the only good market for scrap and the continuation of demand in the country is key in the short run. The US market seems to be the only market showing some positive signs for long products at the moment.

Additional protective measures may be seen in the coming months. In this event, steel trading would come under increased pressure.

Outlook for July

The summer closure periods of mills located in the EU are expected to be on the long side. Meanwhile, discussions concerning post-Ramadan tonnages have already started to awaken some positive sentiment. Lead times from order to execution are extended and are expected to continue the same way for July and August.

Mills’ costs of producing from pig iron and coke are going down and their margins are expected to improve. Price reactions both for flat and long products may be seen.

WOULD YOU AGREE OR DISAGREE?

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The supply and demand imbalance in the global long steel products market has worsened lately. Although real demand is not that bad globally, the continuous decline in prices of raw materials is causing a delay in purchase decisions, resulting in a decrease in apparent demand. In some markets, especially in Europe, this is putting pressure on prices. Demand seems to have dried up almost completely in many regions, while stocks at steel mills are quite high. The mills have been and are still trying to adjust production but apparently such efforts have not been sufficiently significant in scale or consistent enough, unlike the success of output adjustments at the end of 2008 and in early 2009 when the industry experienced a similar negative business environment. Consequently, there have been plenty of options for buyers in the market lately. Under these circumstances, buyers are opting to wait until the last minute before placing an order and, when they do eventually order, the lead times are quite short and transaction volumes are being kept as low as possible.

The purchasing managers index (PMI) in the USA is once again below 50 percent, which is surely not good news. Domestic market demand in Turkey has been quite good, though there is a certain degree of uncertainty now following the recent developments in the country. On the other hand, the situation is improving in the Arabian Gulf markets due to big infrastructure projects. As a result, mills in the region are working at full capacity.

In fact, consumption of steel-related items is, remarkably, not that bad. Competition in the market is extremely high, and the aforementioned buyer behaviour puts pressure on prices. In response, mills are still cutting production, which has been pulling down raw material prices. Thereforemills are looking to increase positive margin. At least, raw material prices are either at or very close to the bottom, and so the downside room appears to be limited.

Outlook for June

The situation in the market is critical. The holiday season is ahead and there are no great expectations for the short and medium term. That said, raw material prices are now very close to the bottom and a possible rebound in the coming weeks would change the mood in the long steel market.

Would you agree or disagree?