Short Range Outlook : July 2016

Volatility in pricing and availability still a challenge for global long steel products market

The global long steel products market has been going through a volatile period since March this year. Volatility in pricing has led to swings in availability of both steel and steel scrap, and this continues to be a challenge for the business environment. With low inventories in general throughout the supply chain comes larger pricing swings.

Mills currently searching for new orders for post-holiday period

Due to competitive price levels in some areas, restocking took place a few months ago and brought significant demand – which had previously been delayed – back to the market. In return, prices went up and pressurized those who had not bought at the time and so even more demand emerged. However, it now seems that most urgent demand needs have been met and mills are currently searching for new orders for the post-holiday period.

Short lead times preferred; both buyers and sellers expect market to rebound soon

The northern hemisphere has entered the summer lull, with reduced activity for both buyers and sellers. This has caused decisions on relevant volumes being postponed for a few weeks. Stocks in the system are not at high levels and so purchases to replenish stocks need to continue. In this situation, short lead times are a requirement and so supply from neighboring regional sources is the first option. Even with the most recent price decreases, the sentiment in the market is not too negative and both buyers and sellers expect the market to rebound soon.

US and EU markets to see greater stability due to protectionist measures

The US and EU markets will remain relatively more stable after all their protectionist measures. Ongoing firm pricing is observed in North America. It looks like a gradual decline in prices may have started in the larger EU market, but this may not mean reduced margins for producers as input costs are down.

Turkey waiting for improvement though markets likely to be more challenging

Turkey is waiting for any uptick, from wherever it will come. Many markets are not ordering as many tons as they used to. The Far Eastern and Middle Eastern markets are expected to be more challenging.

Production adjustments contribute to more balanced market

After shutdowns and production adjustments, some markets are showing improved equilibrium, but more needs to be done. The market is more balanced than before, but unfortunately is still far from being balanced.

Some positive signs from China but outlook still negative

There are positive signs from China such as production cutbacks, environmental policies and relatively smaller-than-normal amounts of inventory, though the outlook still remains negative. There are fewer export destinations and many closed markets.

China expected to take serious steps to eliminate pressure on global market

China is expected to take serious steps to eliminate the pressure they have created on the global long steel products market. There are continuing signals from China of capacity reduction through mergers of steel assets.

Price upticks in China a positive for the global market

Stocks in China are still relatively low and domestic prices have started to rise with a similar trend for Chinese export prices. In addition, the iron ore price seems to be stable at above US$50/mt CFR FO main Chinese ports, which is a positive for the market outlook.

Brexit result still has to be digested

On a separate note, the Brexit result in the UK still has to be digested and it is really difficult to foresee the consequences yet. The political uncertainty does not really help to stimulate economies throughout the EU. However, so far we have not seen any collapses due to Brexit.

Levels of competition not as strong as they have been

Pricing cuts have redistributed demand to a broader scope, bettering the fundamentals going forward. As a result, competition in the market is still high in general but reasonable in some areas. Overall, it is less than at any time over the last twelve months or so. Domestic markets continue to buy domestic products and mills in North America and the EU are fairly well booked through August. However, competition will be serious in the coming months.

Satisfactory short-term outlook for North America and EU but greater concerns for rest of world

The global long steel products market is still fluctuating and remains unstable. The short-term outlook is satisfactory for the North American and EU markets. However, it is still worrying for the rest of the world as uncertainty continues in an unpredictable market.




Leave A Comment