Long steel products demand varies significantly between different markets

The 70th meeting of IREPAS (International Rebar Exporters and Producers Association) was held in Barcelona, Spain on March 31-April 1. There were 101 producer representatives among the 330 registered delegates from 39 different countries.

Ioannis Meimaroglu, chairman of the IREPAS raw material suppliers committee, underlined the record-high 44 registrations of representatives of a total of 32 different raw material supplier companies for this latest IREPAS meeting, and continued by stating that, in the first few months of the current year, scrap exports from the US and Europe have declined by as much as 30-40 percent year on year, partly due to the harsh winter conditions, but mostly due to the strong demand coming from domestic mills in the US. Meimaroglou quoted the US suppliers who mentioned that, even if scrap prices in the international market reach the level of $400/mt, it will still be difficult to compete with the current strength of the US domestic market. A similar situation was also outlined by European suppliers from Germany, Belgium and Sweden.

The substantial decrease in scrap exports from Romania – down to a monthly volume of just 72,000 mt compared to the previously normal monthly volume of 150,000 mt – came as a result of low scrap collection prices, stated the committee chairman, adding that scrap availability will continue at Rostov and other Azov Sea ports, especially after the opening of navigation on the rivers (around mid-April), but, of course, only if international market prices reach at least the same levels as prices from domestic factories.

The IREPAS raw materials suppliers committee chairman also said that Russian scrap exporters are now facing significant financing problems, as banks are taking serious measures after the events in Crimea and in eastern Ukraine in general. This may lead to new financing conditions for the suppliers and their clients, at least for a period of time until the normalization of relations between Russia and Ukraine, he remarked. “A new fact, underlined by some participants in the committee, is that scrap demand has now started to come from countries like Mexico and Egypt, which will further affect the availability of exports from the traditional suppliers,” Mr. Meimaroglu said.

Wilhelm Alff, the chairman of the IREPAS traders committee, evaluated the market situation stating that the supply-demand imbalance still exists and will continue in the short to medium term, despite quite low capacity utilization levels in Europe, especially in southern Europe. The traders remarked that in China, although some outdated capacities are being closed for environmental purposes, they are being replaced by larger and more advanced mills. Regarding the ongoing antidumping duty cases in the US in relation to Turkish and Mexican rebar, mixed opinions were expressed by traders, with no significant margin anticipated for Turkish rebar suppliers. Traders believe that protectionist practices will continue to be adopted.

Mr. Alff also mentioned that long steel product imports are expected to decline in the Algerian market with the commissioning of new capacities, including the new rebar mill of Turkish steel group Tosyali, which began production in June 2013. Lower long steel product demand in this country will affect Spanish and Italian rebar suppliers negatively, as Algeria is the main export market for southern European long steel mills.

Representing the IREPAS billet suppliers committee, Margarita Zvezda from Russian steel producer Evraz, stated that Ukraine and Russia – the largest steel billet suppliers – witnessed stable billet supplies in 2013, with Evraz permanently stopping a plate mill and thus having additional ~400,000 mt of steel for exports in the form of square billet, while Ural Steel shutting OHF production.

Ms. Zvezda remarked that Turkey, a long-standing net billet exporter, has become a net importer of steel billet last year, firstly because Turkish steel billet producers are mainly EAF-based and higher scrap prices harmed these producers’ cost-effectiveness, causing them to lose market share in export markets to CIS mills, which are mostly BOF-based and have cheaper iron ore supplies. Secondly, Turkish steel producers have preferred to import cheaper steel billets from the CIS instead of producing crude steel to cast steel billets. The IREPAS billet suppliers committee does not foresee any change in this situation in the mid-term, as some CIS billet suppliers are expected to continue sacrifice their margins in order to provide discounts to undercut Turkish steel billet prices.

Ms. Zvezda also stated that Iran had been a major player in the Middle Eastern steel billet market until international sanctions were imposed, adding that, if political issues are resolved, it will again become an important steel billet importer. However, she went on to say, this situation is not expected to last long, as Iran is close to becoming self-sufficient in terms of steel billet supplies after the commissioning of ongoing steel billet capacity projects.

As regards Egypt, Ms. Zvezda stated that Egypt has not experienced a genuine recovery in long steel consumption with significant overcapacity being in place, while a big portion of existing long steel demand is coming from illegal construction sites, a risky situation if the government decides to undertake measures, she said, going on to state that, with the commissioning of the steel billet plant project of Egyptian Steel, the country’s demand for steel billets is foreseen to decline.

Kim Marti, IREPAS chairman and chairman of the rebar and wire rod suppliers committee, said that long steel products demand in GCC countries is quite strong as usual, especially in Qatar. Local governments’ infrastructure spending, most importantly on housing, is providing support for higher demand. Stability is foreseen to continue in these countries which have solid budgets. However, he added, some new rebar capacities are coming on stream in the Middle East and some capacity expansions are also being carried out.

Mr. Marti stated that significant differences are seen between the north and south of Europe in terms of long steel product demand. In Germany, he said, residential construction is supporting long steel demand and in Poland EU funds worth €1.6 billion are expected to be spent mostly on infrastructure investments. Long steel demand in Spain and Portugal is not anticipated to decline further after the severe contraction in past years, though Italian long steel demand may decrease by a further 10 percent this year, Mr. Marti warned. Greece, surprisingly, is foreseen to witness some improvement in long steel demand, with some infrastructure investments.

After the municipal elections, the Turkish economy is expected to regain stability, the IREPAS chairman said, adding that Turkish rebar producers are not expecting high antidumping margins as a result of the ongoing trade case in the US against Turkish rebar.

To conclude, Mr. Marti stated that financial restrictions are limiting opportunities for rebar and wire rod producers, while providing some opportunities for traders.

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