In the global long steel products market, there are signs that supply has caught up with demand and that the supply-demand balance is becoming more neutral. The market seems to be getting back to normal in terms of lead times, prices, etc. We are now in a period where things have to get back to normal, which in fact may be different from where it all started. A price range higher than the beginning of the fourth quarter of 2020 will probably be the new normal. On the other hand freight rates are still incredibly high.

…but Section 232 and EU safeguards still in place

The supply-demand balance seems to be back on track, but of course with the caveat that Section 232 is still in force as well as the EU safeguards, which make supply in both places shorter than necessary. The protected markets will continue enjoying their positions until the measures in question are terminated.

Slowdown in Far East a blow to the global longs market

We should also be following the Southeast Asian and Far Eastern markets. The slowdown in the Far East has dealt the market a strong body blow. The Asian markets are making adjustments, but most would say that everyone is happy over there. The Indian and Vietnamese mills are exporting, while new plants in Indonesia as well as the Japanese mills are making historic profits. South Korean mills most likely will do the same. The Russian mills located close to the ports are still paying their export tax and continuing to export.

EU cut and benders face rising stocks

The stocks of the cut and benders in the EU are being filled up more and more and a number of projects are being put on hold or being delayed due to the high prices for all sorts of construction materials including deformed reinforcing bars. The cut and benders are feeling a significant drop in order income and are holding their breaths to see how the EU mills will react to fewer order entries. But with the holidays ending, stronger demand is expected before the winter starts. As a result, no meaningful drop in EU mills’ prices is expected, especially due to the lack of alternatives from imports. Most of the cut and benders have been managing the drastic price increases so far and low-priced projects are fading out.

Supply seems to be catching up with demand in US market also, imports still difficult

Demand in the US is high, but supply seems to be catching up with the demand in this market as well. There are still some shortages, especially on the West Coast.  However, it is difficult for imports to fill the demand shortages due to shipping constraints. With the erratic and historic high shipping prices, most mills prefer to offer on FOB basis. Importers who buy on FOB basis on all occasions are in for a surprise when cargoes are ready to ship. To add to the problem, most ports are full and do not wish to receive more cargoes. Especially for rain-sensitive cargoes, indoor storage space hardly exists. With all these high prices, credit has become an issue for importers. Hardly any buyers have full credit to insure the receivables.

Freight rates out of touch with reality, no one wants to book on FOB basis

Freight is a major factor nowadays. Even for the traditional routes, freight rates have lost touch with reality. Traders have been punished by the high and unpredictable freight costs and are now careful as regards new business. No one wants to book on FOB basis. It is getting more and more difficult to get a quotation, which makes it difficult and/or risky to offer on CFR basis as well. This situation will create short-term downward pressure on prices and long-term shortages in importing countries. Regionalization is the current trend as sea freights are exceptionally high.

China’s steel output restrictions may buoy up steel pricing

China’s restrictions on steel production at 2020 levels will mean stronger Chinese demand for semi-finished steel imports, which should support other regions, especially ASEAN producers. It could also buoy up steel pricing. China’s announcement of production cuts is welcome amid environmental concerns and may support worldwide billet prices, but it may also put further pressure on ferrous scrap prices due to less demand. Most Chinese production is based on iron ore and has already gone down a notch, and so the impact on ferrous scrap may be limited.

Europe impresses with steel production performance in January-July

European steel production strengthened during the first seven months of the year at a stronger pace than production in many other regions. Scrap demand in the intra-European market has been stronger than normal, and this situation seems set to continue for the coming quarter. Semiconductor and component shortages continue to weigh on industry. Supply of higher quality scrap grades and industrial scrap has become tighter.

Coronavirus vaccinations should support demand levels

Although the number of Covid cases is still high and we are again entering the season of colder weather in the northern hemisphere, the post-pandemic rebound and reopening are continuing despite setbacks due to the Delta variant of the coronavirus. The vaccination process will surely allow us to continue with our daily lives and so demand should continue.

Insurance becomes an issue due to increased value of cargoes

Demand is still good and mills are booked for the next few months. Moreover, huge investments are on their way. Payments seem not to be a problem even though insurance is becoming an issue simply because the value of cargoes has reached very high levels.

Future looks promising due to planned infrastructure investments worldwide

Almost all countries are looking at some type of stimulus plan, with infrastructure being high on the list as it is the easy choice. Money is easy to print for the US and the EU, while all others have to borrow at somewhat reduced rates. Stimulus money is still flowing and infrastructure spending in particular looks to continue for several years in the EU/ UK and North America.  Nevertheless, the future looks promising for infrastructure investors. It is also a good time to be melting domestic scrap and selling long products regionally.

Competition starts to normalize

The competition in the market is also expected to get back to normal, with demand reaching pre-pandemic levels. There is strong competition between Turkish long product exports to Asia and Asian-produced material. Otherwise, competition is normal and acceptable. As for the ferrous scrap market, there is regionalization and competition is strong in general,

Overall situation stable in global longs market

Overall, the current situation in the global long steel products market can be defined as stable and perfect to proceed, with some fluctuations here and there.

Satisfactory outlook for next quarter in EU, some price cuts possible in North America

For the most part, there is very little steel to be sold during September, October, November and December. The outlook for the next quarter is satisfactory in the EU, as for the ferrous scrap market. However, some downward adjustments in the North American market may be seen and negativism is bound to spread and may affect other markets. Accordingly, it may be time to wait and see or to proceed with caution in some markets.

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The current situation and sentiments are generally very good in the global long steel products market. Order books are mostly filled to above average levels. The holiday season is over, winter in the northern hemisphere is coming to an end and vaccinations are progressing. These factors as well as stimulus activities, a will to return to normal, and strong investments are all strong positives for the global long steel products market. With production increasing in many parts of the world at once, commodities, raw materials and steel will continue to be in high demand during the spring.

Producers eager to raise outputs amid strong price trends

Everyone in the market is working to make more steel to take advantage of the current situation. Iron ore-based producers are starting up blast furnaces, which will come on stream over the longer term. Steelmaking raw materials and commodities like oil are trading on strong price trends. There are historic metal margins for flat products, and difficult margins for most long product markets.

Tight supply and reopening of economies drive inflationary pressure

Very tight supply chains in general and the continued path towards the reopening of economies are driving inflationary pressure on everything from commodities to freights. Winter conditions in Europe and the US in February were logistically troubling. Semiconductor shortages slowed down automotive production, with limited scrap availability as a result.

EU steel prices close to 2008 peak, but EUROFER still seeks safeguard extension

Imports have dropped to historically low numbers in the EU because of the prevailing safeguard measures. As a consequence, the downstream industry is facing trouble in finding the grades and volumes they need. Steel prices in the EU market are almost as high as at the peak in 2008 and international prices are even higher or equal to EU domestic prices. Moreover, China – the preferred enemy of EUROFER – is not really interested in exports anymore but is seeking to cut back steel output. China may also cut back the tax rebates on exports, which would certainly have a further negative impact on export volumes from China. Under these circumstances, there does not seem to be any threat of imports for the EU domestic market. Nevertheless, EUROFER is still pushing for an extension of the EU safeguard measures.

Importers under pressure in US market

The current situation seems only to be worsening from the importers’ point of view in the US market. In addition to supply shortages, importers are now dealing with shipping difficulties, especially as regards obtaining containers and serious local port congestions. Both material and shipping prices are at historic highs, recalling 2008. Most domestic mills are fully booked through May and June, thus making future sales even more difficult. It is now clear that the Biden Administration will not immediately change the trade restrictions imposed by former president Trump. Overall, difficult times continue for the importers.

China to step up focus on EAF-based output, raising pressure on scrap prices

China has already returned from its New Year holiday in a positive mood that has helped demand to resume and prices to pick up. This will also be supported by warmer weather conditions. China is starting to reduce steel output to fulfil environmental targets and aims to reduce pollution by 40 percent by the end of 2021. Accordingly, BOF plants will reduce capacity utilization, while EAF plants will take over this share of production. A likely consequence of this will be to increase pressure on ferrous scrap prices.

Competition relatively good in global longs market

Competition in the global long steel market is in a relatively good condition. The only exception is the import market in the US where competition is still high. Elsewhere, the principal exporters are still exporting, while the principal importers are again importing. Asia looks like becoming more competitive in billets and reinforcing bars. Producers are mostly relaxed these days, though in the coming months the effect of all those blast furnaces being refired within the past month or so will start to be felt in the market.

EU domestic mills in a strong position

There is not much competition in the EU right now. The mills in the EU are aware that a lot of material still has to be bought shortly as stocks at many benders are empty. As quotas are tight and rumours of an extension of safeguard measures already exist, domestic mills can sit back and wait until buyers are obliged to make a move. In the meantime, the mills have to watch out for opportunistic exporters from other regions.

Ex-EU scrap supply reduced amid strong intra-European demand

Exports of ferrous scrap from Europe are slower due to intra-European demand being strong. European political activity and industry protectionist efforts to limit scrap exports from Europe are troubling and pose a risk for free trade going forward should they succeed, even if partly.

Outlook for next quarter much better compared to last year

The outlook for the next quarter is much better compared to last year, and is very good for most of the market. The market can generally be described as all set to prosper, with the exception of the import market in the US which still is unstable.

How permanent will demand be and how quickly can supply be adjusted?

European construction activities almost proceeded at 100 percent levels amid the mild winter conditions. The market has the potential to be very strong in the second quarter. There is sufficient demand for long products worldwide despite the pandemic. The relevant questions now are; how permanent will demand be and can supply to the market be adjusted quickly enough when demand decreases? The outlook for the US market may still be considered to be an exception. Two big infrastructure projects, one in California and one in New York were taken out from the US$ 1.9 trillion stimulus and the increase in infrastructure spending has been delayed.

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