Short Range Outlook : January 2017

Fears recede in global long steel market amid upbeat sentiment for 2017

There has been no significant change in the global long steel products market compared to last month in terms of supply and demand balance. Demand remains relatively weak, but we have seen better discipline on the supply side, which has had a positive impact on pricing dynamics. Demand is expected to pick up in the coming weeks. Economic numbers are strong and most fears regarding Brexit, the American election or European Union problems are disappearing. All of these factors have helped the year to finish with positive sentiment for 2017 and a better forecast for demand, particularly in the US and EU markets.

Market expected to maintain its strength after the holiday

In December, after some hesitation, buyers in the global long steel market understood that the fundamentals of demand and raw materials dynamics were pushing up long product price levels. Subsequently, buyers completed a last round of purchases before going on holiday, in the belief that the market will stay strong after the break.

Long product pricing has not changed very much during past 30 days

While demand was rather slow during the holiday season, actual pricing has not changed very much during the past 30 days. The big swings have come in China, but these swings seem to be rebalancing themselves after the fluctuations in the volatile futures markets.

Chinese steel exports to continue to decline, increasing opportunities for others

Trade is becoming more regional as China’s excess output is capped due in part to capacity cuts, greater domestic consumption and trade limitations, which is good news for the capacity utilization rates of steel operations elsewhere. Manufacturing PMIs are rising in Asia, the US and Europe. There are expectations that Chinese steel export volumes will continue to be reduced, which will increase trade opportunities for others. In this context, after so many years the first reinforcing bar export contracts for shipment to the Far East were concluded by Turkish suppliers.

Scrap becomes a more attractive raw material

Ferrous scrap has become a more attractive raw material as the share of steel output outside of China is rising and since virgin raw material costs have continued to remain at inflated prices. Demand for scrap has risen in integrated steel production.

Trading conditions fundamentally stronger compared to a year ago

Positive sentiment continues to be observed in the global long steel products market and, for a few reasons, a better supply and demand balance seems to be contributing to an improvement in trading conditions, which definitely benefits market players as China seems to be out of the picture now. Regional changes are not affecting the global market much. There is again optimism in trade, with current conditions fundamentally stronger than conditions a year ago.

Improvements anticipated both in US and EU

Consumption in the US is expected to rise higher. That said, it may come with severe limitations on imports. Conditions in the EU market are also expected to be better. Raw material price increases and the trade cases against companies and countries with non-market practices are also helping the market to protect its strength. New dumping cases will almost certainly have an additional impact. On the other hand, we have seen metcoal prices coming down significantly but not having an impact on the market. The general mood for 2017 is certainly better than 2016.

Some uncertainties remain; Turkey holds its ground in rebar exports

Only the political environment and uncertainty about what is going to happen after January 20 may cause concerns. The weakening of the euro, the financial situation in Italy, Brexit and the upcoming election in Germany still pose some question marks. Growing protectionism, like the recently-initiated antidumping and CVD case by Egypt is also a concern. Nevertheless, Turkey has achieved the same total rebar export figure as in 2014 and 2015 despite all trade actions in 2016. The same figure is also expected to be achieved in 2017.

Production increases in Western world may contribute to greater competition

Competition in the market is still intense, but seems to be more reasonable due to a better supply and demand balance thanks to demand improvements, as well as being fairer due to trading cases. However, we might see more competition than in the last quarter of 2016 due to the tendency towards production increases in the Western world.

Supply-demand balance is vital to support workable prices

Price increases may have stalled in the market for the time being. Any further increases may face more downward pressure. Accordingly, the equilibrium of demand and supply is vital in order to support workable prices for both producers and consumers.

Stability generally prevails in market at present

The current status of the market is stable and bodes well for the future despite some fluctuations in certain regions.

Satisfactory outlook for coming quarter

The outlook for the coming quarter is satisfactory despite some uncertainties. A strengthened US dollar will add to dollar debt costs in emerging markets, but it will also add to US purchasing power and should boost importation into the US, especially of goods such as long steel products. Raw material costs have also been increasing as well as the demand. Steel prices need to rise significantly in the first quarter.



Leave A Comment