Short Range Outlook : April 2018

Confusion and uncertainty reign in global long products market

There is obvious confusion and uncertainty in the global long steel products market triggered by the announcement of new tariffs on steel imports by President Trump as a result of the Section 232 investigation in the US, the subsequent exemptions from these tariffs, and the resulting safeguard investigation announced in the EU. Major exporters to the US – Canada, Mexico, Brazil, South Korea and Europe – have all been temporarily exempted from the recently introduced universal import tariff, and so the precise impact on international trade remains unknown.

“What’s going to happen next?”

The reaction of the EU to the measures brought in by the Trump administration, and the expiration or otherwise of the exemptions from the 25 percent duty in the US on exports from the EU and the other countries mentioned can substantially change the flows of long steel products among the different markets. Under these circumstances, it has become extremely difficult to make business decisions as the prevailing question in the markets is, “What’s going to happen next?”. Buyers of long steel products are in a bind, not knowing what way to move, as they speculate on what may happen after May 1 – the deadline for the US decision on the exemptions.

Current conditions unfavorable for sound business decisions

Since the exempted countries have to conclude their negotiations with the US before the end of April, which may be rather difficult, the US decision may be postponed for another month or so, prolonging the uncertainty, or the uncertainty could be brought to an end. All this is not positive for sound decision-making in business.

Stronger demand and higher prices in US, but situation is volatile

Demand in the US market is actually stronger than before and supply to the US is now limited due to the Section 232 duties on certain countries. Prices are up, but the current circumstances have created further volatility where nothing is permanent and all is temporary.

Steel production still profitable in China, which remains out of export market

Chinese finished steel inventories were very high in February and March, resulting in price erosion, while these inventories have been sold off as some short-term loans had to be paid back to the banks by the end of March. The large inventories in China also dragged down iron ore and steel pricing last month. Thus, steel production is still very profitable in China, even though prices have shed $30-50/mt since the Chinese New Year holiday. Having said that, China still remains out of the global long products market for the time being and this combined with strong demand everywhere is a positive factor.

All other regions performing more strongly, global demand remains elevated

With lower steel volumes exported, all other regions are performing more strongly. Solid production in the European and US domestic markets is expected during the spring months. Global demand for steel products and ferrous scrap remains elevated.

Low-to-medium competition in international market

The international market is characterized by low-to-medium competition. However, this may change with a potential trade war between the US, the EU and China. There exists obvious uncertainty together with stability issues, and price fluctuations are being observed in some regions.

Very high likelihood of ending up with more safeguard measures, as back in 2002

The likelihood of ending up with more safeguard measures as happened back in 2002 is very high. The EU will probably apply quotas instead of tariffs, meaning that both the US and the EU prefer to have control over imports rather than simply blocking imports.

Outlook appears satisfactory for next quarter, but changes may happen

The outlook for the next quarter is satisfactory as of the current moment. That said, Ramadan in May and June, and the US election season starting at full speed on July 4 could change all that. Of course, a lot can change again on May 1 for the US.



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