The business environment in the global long steel products market, particularly in terms of the demand and supply balance, has not improved meaningfully. Other than that, the situation has worsened as the Trump Administration’s increase of US import duties up to 50 percent caught many exporters off guard. The uncertainty created by the Trump administration by doubling tariffs is terrific for those who are protected and terrifying for those under attack. These sudden changes in duties and tariffs make exporters to the US think twice about exporting and make it very difficult to come to a decision.

Buyers wait and see as outcome of talks awaited

Rumours about talks with Mexico and Canada and other countries’ approach to the US administration to see if they can obtain an exemption in any sense have put buyers into wait-and-see mode. On the other hand, huge debates and negotiations are being carried on between suppliers, receivers, and traders about who should be responsible for the extra burden for those cargoes which arrived at US ports after tariffs were raised to 50 percent.

Importers into US face serious difficulties

Importers into the US continue to face serious challenges, especially with cargoes already on the water or ready for shipment under L/C terms. Many are forced to either absorb heavy losses or cancel shipments altogether.

Prices creep up in US due to new 50 percent tariffs, consumers frustrated

In the US, demand remains moderate, but prices have started to creep up – largely due to the protection of the newly imposed 50 percent duty on all steel imports. Despite this, domestic prices are still not strong enough to justify new import orders. Meanwhile, persistently high interest rates are discouraging new investments and slowing down construction activity. In summary, aside from a few US domestic mills benefiting from the current trade environment, most steel consumers and processors remain frustrated with the situation.

Impossible to compete with exports from China and SE Asia

Elsewhere, it is not possible to compete with exports from China and Southeast Asia. Stimulus programs to help the market in China have not been effective at all. We can assume they will keep exporting heavily, which will mainly hit the other exporters in the region.

Europe flooded with cheap imports, regional mills face high costs

The weak dollar and displaced tons from Asia have encouraged imports and so Europe is flooded with cheap imported steel, while energy costs for European mills have gone up. Buyers have taken early and extended holidays, but scrap prices stay high. European mills are not able to cover melting costs. Unless demand picks up after the summer break, production cuts are likely.

Expectations of interest rate cuts provide some glimmer of hope

There is still some hope among market players that some of the recently announced tariffs will backfire. Expected interest rate cuts may be the only positive so far. However, it seems the US Federal Reserve will wait a little longer to see the impact of tariffs on inflation. Interest rate cuts are also expected in Turkey, though demand there is still low. The only activity is seen in construction in the earthquake-hit region and in the renewal of old buildings.

Market status unstable, short-term outlook unsatisfactory

The current status of the market can be described as unstable and the competition in the market is very strong all around. It is very difficult to predict the outlook of the market under the prevailing uncertainty created in the market. The market is structurally weak. Nothing will probably drive the market during July and August until the start of September. Accordingly, the short-term outlook for the market is unsatisfactory.

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The supply and demand balance in the global long steel products market has not improved compared to previous months. Unfortunately, the positive expectations after the Chinese New Year holidays have not materialized. It seems Chinese exporters will continue to be aggressive, which of course will also drive other Asian exporters (Japan, Vietnam, Taiwan and South Korea) to adopt a similar stance. If we look at the EU import statistics, we see a massive shift towards Asian suppliers. On the other hand, demand is not picking up as the market had anticipated or hoped, which puts pressure on both prices and production. However, the markets still hold positive hopes for the second half of the year.

Chinese real estate sector in deep trouble, Chinese exports may surge again

Two major Chinese developers, namely, Evergrande and Country Garden, are in deep financial trouble. There are some worrying rumours of infrastructure projects being cancelled due to the lack of funding. Iron ore with 62 percent Fe content is trading at around €116/mt and coke prices have dropped as well. This weakening of raw material costs brings many mills in China into positive territory. The pressure on Chinese long product mills is mounting and, if the rumours of the cancellation of infrastructure projects materialize, this could cause a surge in Chinese exports, supported by reduced raw material costs.

EU market very quiet amid reduced residential construction in northern Europe

The EU market is very quiet as residential construction has declined substantially in northern Europe. There is very little activity and prices from domestic mills are as stable as a rock. There is some increase in imports including unusual origins such as China, Oman and the UAE. Other sources are not able to compete with domestic offers.

Situation unchanged in US but higher interest rates a problem

As for the US, the situation is unchanged. However, the earlier optimism that the interest rates would come down sooner has vanished. Commercial and residential construction has not picked up and any improvement will have to wait until the summer. Government-funded projects were also affected by the lockdown of finances by the House of Representatives, which have just been released. There are discussions about converting empty office spaces to homes to cover the home deficit, which will not help the steel industry. Auto sales are also affected by the interest rates and are flat. In short, we are on hold for the next two moves of the US Federal Reserve. Rebar prices are steady but face downward pressure with lower raw material costs. Due to higher shipping costs, imports are not as competitive. HRC prices are still on a downward trend, which is affecting all steel futures. Slow economic activity in China after the Lunar New Year holiday and the lack of prospects for a quick easing of interest rates in the US have put pressure on commodities worldwide.

Turkey struggles in markets where it was formerly dominant

Turkey is competing on many fronts. Asian, GCC and North African exporters are now exporting heavily to markets where Turkey used to be dominant.

Lower raw material prices the only good news for steel mills

Iron ore prices have hit a six-month low, while ferrous scrap is being generated in decent volumes in the US, which has meant more tonnages destined for export. In Europe, the slow economy has reduced ferrous scrap flow and also demand from the steel industry which is struggling with poor order books. The only good news for steel mills nowadays could be that the raw material prices, both for iron ore and scrap, are going down. Also, lower activity means lower volumes, reducing supply pressure on the markets.

State subsidies for climate action to be a major issue for years to come

One of the main topics for market players to discuss for years to come will be the definition of state subsidies related to climate change, because it looks like this issue will definitely be used for the next level of protection measures. 

Competition remains local or regional

Competition is still mostly local or regional rather than global due to existing protectionist measures and it is strong where such measures do not exist.

Status of markets generally unstable, outlook slow and unsatisfactory

Under such circumstances, the current status of the market can be described as unstable in many markets or stable at a low level at best. The outlook, unfortunately, is slow and unsatisfactory.

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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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Raw material costs are increasing once again and energy prices are expected to be very high at least until March 2023. Mills are facing cost pressures once more in the global long steel products market. Business activity has been reduced during the past month and, even though scrap and iron ore prices have gone up, net margins have either at best kept pace or in some cases narrowed. In this overall context, the first quarter of 2023 could be a very difficult one for the global long products market, even the worst quarter in a long time.

Mills will be forced to cut outputs further to avoid incurring losses

It looks like some mills are trying not to reduce their outputs too much or only as much as necessary as they will be finishing this year with positive results due to the good performance recorded in the first half of the year. However, the situation will probably be a lot different next year and they will be forced to reduce outputs further in order to minimize losses on their balance sheets. Another reason is that, if they continue to maintain their production levels and sell at a loss, it is very likely that they will face trade measures. In these circumstances, it will take some more time for a new supply-demand balance to be seen in the market.

Uncertainly prevails in EU market over supply and energy costs, imports an option

The gap between domestic and import prices has shrunk so much in the European market that more and more mills have bought domestic, respectively inner EU material in small volumes as uncertainty prevails. Steel buyers in the EU market have started to become nervous about what will happen after the holidays, as the anticipated longer revamps by mills will very likely limit supply. On the other hand, there is a big question mark over the weather conditions in the first quarter of next year. If temperatures remain mild, then demand for construction, which has been healthy so far, will pick up earlier and help mills to raise their prices. However, there is also uncertainty in relation to energy prices, which places a question mark over everything within the EU.

Economies doing better than expected, Buy American package in US could stir up trade battle

After the shock of the war in Ukraine and of energy price hikes, the markets seem to have digested the interruptions of logistic chains and economies look better than expected. The general outlook for 2023 is also better now. That said, in the US the new Buy American investment package will be in force from January 1 and it will be a huge challenge for the EU. A new trade battle could be in the offing.

Possible new official stance on Covid in China could boost steel demand

Covid-19 seems to be under control everywhere except in China. There are some signs that China may quietly dismantle its zero-Covid policy after the Chinese New Year holiday in January. This will hopefully lead to an increase in demand for all steel products.

Softer approach to interest rates could also have a positive impact on steel demand

December is a short month, and there is pent-up insecurity on what energy costs will be like in January, or even tomorrow. On the other hand, we understand governments are concerned about markets and so they talk more softly about interest rate increases and the central banks also appear to be easing off on the issue of interest rates. This may also have a positive impact on demand.

Competition becomes fiercer and increasingly regionalized

Competition in the market is very difficult and fierce wherever allowed. Otherwise, it is more and more regional as markets are increasingly protected. Domestic mills compete with each other and with possible imports. Volume chasing by domestic mills is very detrimental, leading to even lower prices, without the increase in additional volumes.

Outlook for the current unstable market is very challenging and unpredictable

Under these circumstances, the current status of the market can be described as highly unstable and unpredictable. The outlook is also very challenging and unpredictable. The outlook for the first quarter of 2023 is negative and it could be the worst quarter in a long time. The situation is certainly tough, but with the end in sight.

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While the supply and demand balance in the global long steel products market still looks good, the supply side is gearing up. Supply pressure is not expected to create big problems in the short run but may be an issue in the medium term if demand is not able to cope with it. Even Chinese companies have learned that dollars are more important than tonnages. Accordingly, everybody needs to be careful when thinking about adding more tonnes.

Limited supply of Chinese steel is the biggest positive in the global market

GDP is improving worldwide, with the main economies performing quite well. Demand is stable in Europe, and multiple other markets are performing quite well also. That said, the limited supply of Chinese steel is the biggest positive in the global market. China is still holding back and it looks like it will not be back in the export market after the Chinese New Year holiday, which is certainly a very optimistic sign for the market.

Though prices weaken a little in Europe, EU and US drive global consumer optimism

Pricesin the European market have come down a bit due to weakening prices in Turkey and the strengthening of the euro. Nevertheless, the positive mood especially in the EU and US is giving confidence to long steel consumers worldwide.

Strong rebar demand in major consumption areas

As regards the short term, the situation has worsened due to the declines in Chinese steel prices and in scrap prices. However, the prospects in the medium term are brilliant because demand for rebar is strong in the major consumption areas. Hopefully, after the Chinese New Year holiday, the market will move again and scrap prices will rebound, pulling rebar prices up once more.

Wait for Section 232 outcome causes some uncertainty in US market

Demand has been steady in the US with the potential to improve in future months; however, supply in the US is limited. The unknown fate of Section 232 is holding back imports, giving domestic mills the opportunity to increase their prices. This situation may change quickly depending on the results of Section 232.

Reasonable demand and positive sentiment in major Latin American countries

Demand in the major Latin American countries is reasonable, accompanied by positive sentiment in relation to the forecast for 2018. Price adjustments may be seen in the very short term but still not affecting the interesting spread levels. Market prices are expected to trend upwards after the Chinese New Year holiday.

Scrap demand to remain at decent levels in EU and US

The long-awaited correction in ferrous scrap was seen in January despite demand being fairly stable. Decent demand in the steel sector will continue to keep scrap demand at decent levels for the coming month in the European and US markets, since the influx of imports is at subdued levels.

Prices for electrodes to remain challenging

Electric arc furnaces (EAFs) will be faced with challenging prices for electrodes not only in spot trades but also for longer-term contracts as supply restrictions mainly in China reverberate in the global market.The cost difference between blast furnaces and electric arc furnaces will bring scrap prices to reasonable levels.

Depreciation of dollar, oil prices above $65 and unchanged US Fed rates provide support

The weakening of the US dollar, which has depreciated by almost another four percent against the euro compared to one month ago – which means that prices in the EU have appreciated almost by $25/mt just because of exchange rate – continues to ensure that commodity prices are at high levels. Oil prices are above $65 a barrel and the US Federal Reserve has kept interest rates at unchanged levels. These are all positive factors supporting the current atmosphere.

Weaker US dollar and balanced world trade to keep steel and scrap prices elevated

The weaker US dollar coupled with the increased balancing of world trade will likely mean that prices for steel and scrap will maintain somewhat elevated levels as compared with recent years.

Competition is mostly at reasonable levels

Competition in the market is mostly at reasonable levels. However, mills’ margins are sufficient for them to be able to reduce prices to become more competitive if they have to. Currency fluctuations in late January made the environment somewhat challenging and will likely also have trade implications going forward.

Outlook for next quarter is satisfactory

The market can be described as mostly stable and looks set to continue like this, with some exceptions. The outlook for the next quarter is satisfactory.

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