Long steel products market keeps a close eye on China

Global business is slowing down further. It seems that the economy in the European Union will continue struggling, and China will create more head ache in international business with its cooling economy.

The long steel products market has seen some recovery in activity levels after Ramadan and the summer holidays. However, buyers remain hesitant in some geographical areas and also with regard to certain products, in particular wire rod, as growing pressure coming from Chinese suppliers hits the market. The downward price trend in China and subsequent aggressive exports from the country have certainly worsened the situation in the international market. In general, market players are very concerned about both the volumes and prices which may eventually be seen from China.

On a positive note, demand in the northern European Union has improved, while inventory levels are still very low in the EU market in general. Major markets such as Africa and the Americas are maintaining good levels of activity, while demand is still very good particularly in the MENA countries and in the Gulf region (Saudi Arabia and Qatar).

Despite the doom and gloom in the Chinese domestic market, it still seems to be consuming in excess of 15 million tons of reinforcing bars per month. Local Chinese scrap prices are at about the same level as scrap prices in the US domestic market.

Competition in the marketplace is very high at the moment, while the market at present may be said to be characterized by instability.

Outlook for September:

Iron ore-based long products and ferrous scrap-based products will eventually need to align themselves. During the next six months, realignments should be seen in prices of scrap and iron ore and in the gap between prices of long and flat products.  Having said that, the short-term outlook for September is very unpredictable.