The overall business environment in the global long steel products market has deteriorated again. Everything is even more difficult and complexities are increasing further. Nevertheless, the apparent de-escalation of the conflict involving Iran could mark an important turning point. If geopolitical risks continue to ease, we may be approaching the bottom of the current market cycle.

International rebar market now weaker compared to one month ago

The international reinforcing bars market is now weaker than it was a month ago. Demand in the market continues to be subdued, while supply remains high, putting pressure on prices and margins. However, in addition to the positive development represented by the easing of tensions in the Middle East, some producers are heard to have begun lowering production in response to market conditions, which should help improve the supply-and-demand balance over time.

Demand hit by low confidence, more Iranian and Russian billet could depress rebar prices

It seems that the concerns and lack of confidence shown by market players, in particular by buyers, constitute the main obstacles preventing demand from improving. The price of scrap shows how confident mills are for future planning. We may see more Iranian and Russian billets in the market, which would exert further pressure on reinforcing bar prices.

Producers face higher costs of power during the hot summer season

As far as costs are concerned, with energy demand increasing amid the seasonally high temperatures, the higher price of power will also work against producers’ interests.

EU struggles to improve its GDP, domestic prices soften due to weak demand

The overall geopolitical situation is not good for investments and Europe is still struggling to improve its GDP, while energy costs and inflation are rising. In the meantime, we have entered into a new phase regarding EU imports, which will only be observed during the initial days of the new quarterly period and will then be silent for the rest of the quarter. Despite the announcement of the quota reduction by almost 50 percent well in advance, EU mills had been able to raise their prices for a while, but now their prices are falling back to where they were before, as demand is weak all over the EU.

Chinese steel exports continue to increase despite gradual decline in output

There is nothing positive in the Far East except for the gradual decrease in production in China, which, however, will not change anything in the short run. Chinese steel exports continue to increase.

US market very reliant on data centers

Capacity utilization in the US is stalling at 81 percent and domestic mills are announcing increases of US$10/nt. The driver in the US market has been data centers, which are not all 100 percent-financed or are without building permits.

Most encouraging development was the easing of tensions in Middle East

Having said all above, the most encouraging development was the easing of tensions in the Middle East. Greater regional stability could have supported a gradual recovery in economic activity and steel demand, particularly in the Gulf markets. At the same time, despite the ongoing conflict in Ukraine, there are signs of improving demand for steel products. This suggests that reconstruction needs and investment could provide support for the market once geopolitical conditions normalize. These developments had given reason for cautious optimism about the medium-term outlook. But the tension seems to be there again.

Global competition still extremely intense, few genuinely free markets remain

Competition in the global steel market remains extremely intense. Trade flows continue to be shaped by tariffs, quotas and other trade measures, resulting in fragmented regional markets. Within Europe, competition is strong due to weak demand and significant production capacities. Competition in third-country export markets is even more challenging, as suppliers from around the world compete for a shrinking number of open destinations. Today, there are relatively few genuinely free markets remaining for global steel producers.

Current market status unstable, with a very unclear outlook

Under these circumstances, the current status of the market can be described as unstable with a very unclear outlook.

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The regulation sets the total annual tariff-rate quota at 18,345,922 mt, while imports within the quota will remain duty-free, while volumes exceeding the quota will be subject to a 50 percent tariff, a sharp increase compared to the previous 25 percent safeguard duty.

This measure applies broadly to all third countries, including those with free trade agreements or preferential access, reinforcing the EU’s efforts to prevent trade diversion and protect domestic producers. However, imports originating from Norway, Iceland and Liechtenstein are excluded from the scope of the measure. The European Commission also retains the authority to expand the scope to include downstream steel products in future reviews.

The tariff-rate quotas will be administered on a quarterly basis, aiming to prevent import surges within short periods. During the first year of implementation, unused quotas will be carried over to subsequent quarters. However, the commission may later adjust this rule depending on market conditions, including import pressure and supply shortages.

The European Commission will:

• review the product scope regularly,
• assess the effectiveness of the measure every three years,
• potentially adjust quota volumes within a range of 14.4-22.2 million mt depending on market developments.

Annual volumes of tariff rate quotas for some steel products are listed below.

• Merchant Bars and Light Sections  :  881,735 mtons
• Rebars    : 844,526 mtons
• Wire Rods   : 1,569,532 mtons

In a joint statement, the European Parliament, the Council and the European Commission underlined that the EU has taken unprecedented steps since the start of the war to reduce its economic dependence on Russia and prevent its economic activity from supporting Russia’s war efforts.

However, the institutions acknowledged that some dependencies still remain, particularly for certain steel products that are not yet fully restricted. Limited volumes of Russian steel imports are therefore still permitted under transitional arrangements until September 30, 2028, with quotas that decrease annually. The EU confirmed that these measures are designed to ensure a complete phase-out of remaining Russian steel imports by the 2028 deadline.

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

Longs demand in EU hit by variety of negative factors

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

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

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

Positive sentiment prevails in US longs market

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

Longs producers in US happy with prices and volumes

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

Interest rate cuts, if enacted, could give boost

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

Fears of recession and geopolitical uncertainties add to negativity

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

Competition becomes more and more local

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

Market status mostly stable but low, outlook is challenging

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

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The supply and demand situation in the global long steel products market is not getting any better, which continues to put pressure on producers. The increasing political influence on trade flows and particular markets in the form of antidumping and/or countervailing duties including also supply chain restrictions are leading to a more and more regionalized trade with a fairly unhealthy supply and demand balance.

Market unlikely to improve as China keeps exporting and holiday season approaches

As long as China keeps exporting over 6 million metric tons of steel products per month, it appears highly unlikely much improvement will be seen in the market. We are also approaching the end of the year, in other words, the holiday season, which is another factor that will contribute to a slowdown in the markets.

Turkish exports hit by war in Israel, Yemen’s involvement and poor EU demand

The recent situation in Israel and now Yemen’s possible involvement will have a big impact on Turkish reinforcing bar exports. On the other hand, EU demand is not improving and does not offer much hope to Turkish mills in the near future. Capacity utilization among Turkish long product producers is around 50 percent

Some price improvement in EU, but demand remains weak

In the EU, prices have recovered from the lows of the summer due to the shortage of stocks. Going forward, demand remains weak, but mills’ offers are defined by rising scrap and energy costs.

Demand for long products slows down in the US, where as flats are strongly up after end of UAW strike

In the US, demand seems to be slowing down for long products as most buyers are reluctant to purchase material that will arrive at the end of the year, in order to avoid year-end taxes. The US domestic market has seen some good news with UAW and auto producers more or less agreeing terms and returning to business and unprecedented gains on flat products. The end of the UAW strike was one of the reasons of the significant increase in HRC prices seen.

Imports are on the decrease and mostly coming from two neighboring countries subject to zero Section 232 duty, making business more regional, like in Europe. There are more protectionist measures being discussed, with the ineffectiveness of the WTO helping to make globalization history.

Scrap generation in Europe on low side

Slow economic development in Europe has slowed the availability of scrap. The recycling business has been struggling to generate sustainable volumes. There is low demand from the European steel sector and yet lower scrap generation. North American scrap is exported at comparatively lower prices than US domestic prices, at up to US$50-75/mt lower depending on the calculation. However, the volumes for many of the export markets are heavily reduced.

Sanctions against Russia likely to be tightened, US and EU to maintain trade remedies

The sanctions against Russia will be tightened. It looks like the US and the EU will maintain their trade remedies despite the WTO rules. They are even discussing further action against China.

China’s demand keeps raw material prices at relatively high levels

Strong demand for iron ore from China has been pushing up scrap prices, which have thus been maintained at higher-than-expected levels. It is hard for steel mills to decrease prices when raw materials are relatively expensive. China, on the other hand, has started raising its export prices, but whether the prices will hold is questionable.

Market status unstable for some regions, stable at low level for others

Under these circumstances, the current status of the market can be described as unstable for some regions and stable but at a low level for others.

Outlook for next quarter pessimistic or quiet and sideways at best

It looks like all the engines are slowing down, but inflation is also coming down. The outlook for the next quarter is pessimistic or quiet and sideways at best, but we may look for better times in the second quarter of 2024.

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As far as metallurgical sector is concerned, the export tax will be applicable to the products like steel slab, billet, most of the long and flat products, pig iron, coal and coke, HBI and iron ore.

The size of duties for the mentioned products to be exported outside of Russia and Eurasian Economic Union are tied to the ruble exchange rate and are as follows:

Export duty rate according to USD/RUB exchange rate

• 0 in case the exchage rate is less than 80
• 4%  in case the exchage rate is 80-85
• 4.5% in case the exchage rate is 85-90
• 5.5 % in case the exchage rate is 90-95
• 7% in case the exchage rate is 95 and above

For the cargoes declared for exports after October 1, 2023, the exchange rate monitoring period is from August 26 till September 25, and the latest publication results of estimated average exchange rates should be no later than September 27.

At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that the global long products market has been slowing down in general, which is putting pressure on producers. He added that demand for reinforcing bars and wire rods remains very weak and there is strong pressure on prices from the new exporters who are in the market with very aggressive offers and who are not subject to antidumping or countervailing duty measures so far.

The IREPAS chairman said protectionism still prevails as the EU has extended its safeguard measures for another year, which is clear proof that world trade is no longer as it was defined by the Uruguay Round and will continue with its current protectionist structure, which will exert pressure on developing countries. He also added that the CBAM in the EU will replace the current safeguard measures in the region within 12 months.

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: Situation in China exerts huge impact on global market

Jens Björkman, the chairman of the raw material suppliers committee, stated that construction activities in China were slowing down, while steel production remained at high levels despite government restrictions, which has increased the demand for iron ore in the country. The high levels of steel production in China lead to an increase in its exports, negatively impacting the global market. He added that steel production in the country is expected to be cut during the winter season, which may provide a bright spot for the global market going forward, especially for Turkey which is struggling to compete with China’s competitive prices. Noting that the Chinese economy has been struggling for a while, Björkman said that the recent monetary policy easing and stimulus measures in the country to boost the real estate and steel industries will not be enough to boost demand and prices in China.

Looking at Turkey, commenting that domestic production rates are slower than last year due to difficulties such as the high inflation and the hike in interest rates which Turkish mills are facing, he noted that the industry continues to generate demand. However, the production costs from energy are expected to decline, which would positively impact steel production rates.

Focusing on scrap, noting that the US, which still outperforms the rest of the world in economic and business terms, keeps generating decent scrap volumes, while the EU will continue to generate low volumes of scrap, the chairman of the raw material suppliers committee stated that the rising volumes of ex-US scrap supply to Asia were supported by lower container freight rates.

Traders at IREPAS: EU may adjust quotas amid higher long product imports

F. D. Baysal, the chairman of the traders committee, stated that the situation has changed dramatically in the EU steel market due to high interest rates, while investments in construction and consequently steel demand and prices have moved down considerably. Stressing that the EU protects its steel market with safeguard measures, he stated that increased long product imports do not carry as much risk as the surge in flat product imports. He said that the EU may tighten future quota allocations for ‘other countries’ as the long product exports of Egypt and Algeria into the region have increased. In addition, the chairman of the traders committee stated that the subsidies provided under “decarbonization targets” will continue to increase in the  EU, which evaluates the governmental support in the other countries as unfair.Continuing with China, he stated that Chinese steel mills have not reduced steel production in accordance with government restrictions, raising concerns for global suppliers, as China’s exports will increase if its production cannot be utilized domestically. Even though he said he does not believe that Chinese mills will cut production, he added that, if they do so, it will not affect scrap imports but will reduce iron ore demand as 90 percent of the country’s steel production is blast furnace-based.

Noting that the EU continues to put pressure on Russian products with sanctions, Baysal stated that Turkey’s rebar exports have decreased as the country cannot use sanctioned Russian billets to produce products for shipment overseas. Russian billet was at first used in the reconstruction of the earthquake-hit zone in southern Turkey, while now the region’s needs are supplied by domestic production. Noting that Turkey has lost most of its traditional steel export markets, the chairman of the traders committee said that the Turkish industry needs government support as the mills are facing the US Section 232 tariffs and the EU’s safeguard measures.

Producers at IREPAS: Longs market is slowing down amid weak demand 

Murat Cebecioglu, chairman of IREPAS and also chairman of the producers committee, stated that the long steel market has been slowing down amid weak demand which is putting immense pressure on prices. He talked about the general situation in the market, pointing out that previous importers such as Egypt, the GCC and Algeria have now become exporters. Since these countries are not subject to protectionist measures for the time being, they are exporting anywhere they can, especially claiming the market share of Turkey, which is being squeezed by protectionism all over the place, he noted.

Focusing on the Turkish market, Mr. Cebecioglu said there are many unknowns for the future, while protectionism in particular is a big issue for Turkey whose exports are hindered by Canada, the EU and the US. “There are only a few markets left where there is demand and everybody is focusing on those markets,” the IREPAS chairman said. Regarding the Turkish government’s change of monetary policy and starting to raise interest rates, he indicated that this gives hope to the market, though he went on to say that the local market is doing alright, but this will depend on whether the government will continue to increase interest rates.

With Turkey facing some difficulties such as the energy crisis, high production costs and inflation, Mr. Cebecioğlu said that electricity prices are a major factor for Turkish mills and, compared to oil and gas-rich countries, competing has become impossible for Turkey. Replying to a question about possible steps by the government to support the Turkish steel industry, the producers committee chairman pointed out that, under today’s economic conditions, subsidization also leads to another problem, namely, countervailing measures.

Commenting on the longs and semi-finished imports from the ASEAN region, Cebecioğlu said that ASEAN-based mills have been exporting all around the world including to destinations such as Central America, the EU and South America, adding that, together with the newcomers, they have taken all of Turkey’s market shares.

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

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

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

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

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

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

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

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

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

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

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

Strong domestic construction in Russia restrains its exports 

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

Stimulus packages in China have no impact on its exports 

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

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

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

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

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

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

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

US still a locomotive of the global economy 

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

International competition weak amid low prices and high logistics costs 

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

Current market status unstable, outlook unsatisfactory except for scrap suppliers 

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

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As a result of the ITC’s affirmative determinations, the existing orders on imports of this product from Belarus, Italy, Russia, South Africa, South Korea, Spain, Turkey, Ukraine, United Arab Emirates, and the United Kingdom will remain in place.

The DOC found that revocation of the antidumping duty orders on the given product from the given countries would be likely to lead to continuation or recurrence of dumping.

The DOC has determined weighted-average dumping margins of up to 280.02 percent for Belarus, 18.89 percent for Italy, 41.10 percent for South Korea, 756.93 percent for Russia, 142.26 percent for South Africa, 32.64 percent for Spain, 4.44 percent for Turkey, 44.03 percent for Ukraine, 84.10 percent for the UAE, and 147.63 percent for the UK.

The products in question are currently classifiable in the Harmonized Tariff Schedule of the United States (HTSUS) under subheading 7213.91.3011, 7213.91.3015, 7213.91.3020, 7213.91.3093; 7213.91.4500, 7213.91.6000, 7213.99.0030, 7227.20.0030, 7227.20.0080, 7227.90.6010, 7227.90.6020, 7227.90.6030, and 7227.90.6035.