Short Range Outlook : February 2017

Europe, US and Asia lead the way for demand in global long steel products market

Expectations for demand and order books in the supply chain of the global long steel products market made a reasonable start to business in 2017, although a sharp correction in scrap prices caused people to hesitate a bit in the EU and the US. However, market sentiment has not changed much and demand is still showing good prospects for 2017 in Europe, the US and Asia.

Turkish suppliers gain relief as Far Eastern markets open up once again

Turkish mills have recently faced certain difficulties in selling reinforcing bars especially due to low demand at home and the current antidumping investigation in the US. Nevertheless, this looks like a temporary situation as positive news from Singapore and Hong Kong show that these markets are open again for Turkish suppliers. This means that expectations for exports of Chinese material are low in such markets, which generates a positive outlook following the sudden drop in demand which had appeared in the market.

January shock-wave caused by steep drop in scrap prices replaced by uptrend in February

Following the shock wave which had seen scrap prices decline significantly within a very short period by the end of January and the subsequent lower long product export prices from Turkey, the market has started to observe prices moving back up again by early February.

Volatility in raw materials market increases price uncertainty

The volatility in the raw materials market, created particularly by a few scrap export deals from the US due to cash flow issues or overstocking, has obviously increased price uncertainty and weakened price stability in the market. The dynamics behind the recent move of scrap exporters still need to be understood by the steel mills, who are also trying to understand the perspective of scrap suppliers for the coming months. Indeed, scrap accumulation was stronger than demand during the past quarter. These build-ups were then sold off, which pressured pricing. The weakening of the Turkish lira has also been pressuring domestic demand in Turkey and thereby also pressuring scrap imports, as investments in the country have slowed. Since Turkey is the world’s largest scrap importer, its demand levels are important for the scrap markets. Long steel product prices in the second quarter should be adjusted because of the correction seen in raw material prices.

Long steel demand still weak in Latin America

Long steel demand in Latin America remains weak, with no sign of a recovery in the short term. That said, current demand in the US, Europe and Asia are positives in the global market. The supply side is adapting in order to maintain reasonable returns for business.

Lower Chinese exports continue to give regional markets tailwind

In general, demand is stable-to-strong and lower exports of steel products from China to the rest of the world are continuing to give regional markets tailwind. Demand outstrips actual supply in several regions because of existing dumping rulings and pending ones. This may not yet be globally true, but is increasingly the case across the world. Where no dumping barriers exist, or where demand really exceeds supply (as for billets in Asia), buyers are constantly looking for other alternatives to China which has been setting the price.

Upward trend anticipated on back of balanced supply

So far supply feels balanced and it seems that an upward trend will start soon; however, antidumping cases, safeguard measures and import taxes are still among the major factors.

GDP growth in major regions creates positive sentiment

The GDP growth in the major steel-consuming regions and countries creates a positive sentiment in the market despite the questions raised by the situation in Turkey and to some extent by that in Brazil. The aggressive growth policy of new US president Trump also contributes to the positive sentiment in the market. If such sentiment is supported by Chinese exporters, 2017 might be a very good year. There seems to be no export rush on the Chinese mills’ side immediately after the Lunar New Year holiday and, as such, the trend of stable prices seems to be holding.

Competition remains strong despite trade measures

Competition remains strong in the global markets, but is restricted in many areas for different products due to antidumping regulations and threats. That said, it cannot be described as chaotic anymore.

Turkish trade driving both the international scrap and rebar markets

Due to the recent re-alignment of scrap prices versus iron ore prices, we have seen new supply routes open up, for example, for billets and reinforcing bars from Turkey to Asia. Chinese producers are now facing real competition which is not self-inflicted. We can now conclude that Turkish trade is driving both the international scrap market and as well as the international reinforcing bar market.

Satisfactory outlook but largely dependent on developments in Asian inter-trade market

Under such circumstances, the market is still fluctuating as long product producers and consumers are facing months of uncertainty. The outlook will depend largely on developments in the Asian inter-trade market but as of now it is satisfactory.




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