Short Range Outlook – November 2017

Supply and demand still balanced in global longs market amid lack of Chinese pressure

Supply and demand in the global long steel products market remain balanced as exports from China are still not exerting too much pressure on the international market.

Strong demand seen all around the world 

The World Steel Association (worldsteel) has updated its forecast for global steel demand for 2017, forecasting around seven percent growth compared to 2016. Obviously, the main reason for this huge growth is the rise in the official demand figure for China; i.e., +12.4 percent. Such a sharp rise is mainly because the demand previously satisfied by the closed outdated induction furnaces – which were not included in the official figures – is now satisfied by the mainstream steelmakers in China and thus is recorded in the official demand figures for 2017. Nevertheless, demand is strong all around the world and the global capacity utilization rate of 73.5 percent in September is the highest of recent months and years.

Supply has increased in certain areas, shipping has become more expensive

Having that said, prices differ in various regions and markets due to diverse factors. Supply has shown some increase in certain areas and protectionist measures also play an important role in relation to the supply-demand balance. Freight has been very tight over the past month and this has made shipping more expensive.

Local US market weakens despite better GDP growth

The US domestic market is weaker, despite better GDP growth. It is now much harder to import into the US as domestic prices are either similar to or lower than import prices. The preliminary antidumping rates announced against imports of wire rods from certain countries hit the higher-value grades hard, whereas simple grades ex-Turkey received a duty rate of below 10 percent.

Significant price declines seen in Turkey and UAE

On a separate note, domestic billet and rebar price declines of over 10 percent in the space of one month have changed the mood of optimism which had been observed in the Turkish market in early October. Prices in the UAE market have weakened by an even bigger margin.

Signs of a disconnect appear between suppliers and buyers

There seems to be a disconnect appearing between suppliers and buyers who prefer to follow a wait-and-see approach either due to too much inventory or in the hope of lower prices.

International output and demand expected to be strong amid planned output caps in China

So far, mills have been able not only to pass on production cost increases but also to increase their margins. With five million metric tons of steel products per month being exported from China, only half the volume seen in the previous year, and as planned production caps in China during the winter months will further depress exports, we can expect general international production and demand to be strong.

Global ferrous scrap demand to maintain strength as Chinese steel exports diminish

Ferrous scrap has also been characterized by strong demand and will likely see continued solid demand outside of China as Chinese steel exports diminish.

Worldsteel: More steel is not the answer for anyone

Worldsteel has once again reminded its members that more steel is not the answer for anyone. Producers/suppliers are now following prices lower, but slowly.

Regionalization of steel business is driving up local demand levels

Demand is still very good in certain markets, for instance in the EU. The regionalization of the steel business has been driving up local demand levels.

Graphite electrode prices drifting to lower levels but EAF output still to be impacted

Raw material prices are now more in check, and graphite electrode prices are drifting down to lower levels from recent peaks and expected shortages are now estimated at 10 percent instead of at higher numbers. However, the shortage of graphite electrodes is still expected to put a cap on EAF production next year.

Competition still strong depending on region 

Competition in the market is still strong depending on the region, but spreads are one step above the situation that we had some months ago.

Quite satisfactory outlook for global market going forward though US demand raises concerns

The global long products market is stable in general with quite a satisfactory outlook going forward. If the US approves further protectionist measures, this might push scrap prices up again. However, demand has not picked up in the US, which is a concern going forward.




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