Short Range Outlook : October 2018

Global long steel market still in equilibrium though regional differences observed

The  global long steel products market still seems to be in equilibrium in terms of supply and demand. However, the steel trade is becoming more and more regional and so different supply and demand situations may be observed in various regions. Accordingly, although the overall market is generally stable, there are fluctuations seen in certain regions.

Sharp increase in Turkey’s export activity, drop in domestic sales

For instance, in Turkey there has been a sharp increase in export activity and a drop in domestic sales of long steel products. Following the doubling of tariffs by the US on steel imports from Turkey, it seems that Turkish exporters will continue to face difficulties in compensating for the absence of the US market as well as for the loss of sales in their domestic market, with exports to the Southeast Asian and Far Eastern markets. Accordingly, Turkish mills are expected to supply more billets, which will also lead to a drop in billet imports coming into Turkey.

Spread between scrap and rebar at its lowest since summer of 2017

On the other hand, another consequence of the above situation is a spread between scrap and rebar figure of $170/mt which is the lowest since the summer of 2017.

Prices soften in US as buyers become less eager due to approach of winter

In the US, buyers are less enthusiastic about purchasing more inventory due to the coming winter months. Prices in the US are softening as domestic mills compete to capture the majority of the demand that is left. The mills have very healthy margins, which helps them obtain any business they choose. Their lead times are also getting shorter.

Mills in EU under pressure to lower their prices

In the EU, despite full order books, cut-and-benders are not able or willing to achieve much better numbers for projects and this will put pressure on European domestic mills in the near future as they need to have lower prices compared to current levels. However, mills are reluctant to reduce prices knowing that the majority of clients have to buy most of their requirements from domestic suppliers, especially towards the end of the year when tonnages may reach toxic levels.

EU mills hold big advantage over imports

The low water surcharges across the EU and the doubling to tripling of barge rates makes imports extremely dangerous and costly. As a result, the domestic steel producers in the EU have a big advantage over imports.

Global long steel production utilization rates at strong levels

Having said all that, with continued global growth and added demand for steel products, the global long steel industry is performing well and at strong utilization rates.

Agreement on USMCA a positive signal for global trade

The ability of the US, Mexico and Canada to agree on the USMCA, the new NAFTA, is a positive sign within the global trade perspective.

Absence of China continues to ensure optimism

Even though its planned output cuts are much less than anticipated, China is expected to again reduce production over the winter heating period for air quality control reasons, which should cap export availability over the coming winter months. With prices in China still very high, the absence of Chinese long products, or in other words China still only offering limited future offers, helps keep global prices under control and continues to ensure opportunity and optimism.

Demand for scrap remains slack for the time being

Demand for scrap is soft for the time being, especially in Turkey, and this also helps keep product prices in check.

Many suppliers forced to search for new markets as historical trade flows disrupted

Competition is tough in the market but is not on a fair basis due to the attitude of goverments relating to protectionist policies. Protectionism and trade cases all over the world are disrupting historical trade flows and many suppliers are forced to search for new paths. As a result, conditions for fair competition are worsening.

Very difficult to make forecasts due to tariffs and tweets 

Global trade is constantly being tested by political measures, tariffs and quotas, which are making predictions on flows difficult. It is indeed very difficult to make any forecast today since just one early morning tweet can change everything and as there is no guarantee that anyone is exempt from the next tweet. Visibility is still low due to current remedy investigations, e.g., the safeguard investigation in the EU.

Overall picture in global long steel market still positive

However, overall the picture is still positive, with growth rates, demand and oil prices among some of the positive indicators. The remainder of 2018 is expected to run well in many markets simultaneously, with solid demand for ferrous scrap as a result. As a result. the outlook for the last quarter of the year is satisfactory.



Leave A Comment