Short Range Outlook: July 2013

Supply-demand imbalance still prevails in long steel market

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.




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