IREPAS in Duesseldorf : Changing trade flows and market challenges discussed against backdrop of protectionism, trade conflicts and depressed conditions

The 81st meeting of IREPAS (the International Rebar Exporters and Producers Association) was held in Duesseldorf, Germany on September 22-24, 2019 in conjunction with the SteelOrbis Fall’19 Conference. There were 138 producer representatives among the 426 registered delegates from a total of 46 different countries. There were also 78 registrations representing 38 different raw material suppliers.

At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that the industry is experiencing a very difficult period for world trade. Cebecioglu said that the US tariffs have triggered similar protectionist reactions from certain other countries. Not only the US, but others as well are using every possible alternative to assign maximum antidumping or countervailing duties or quotas in each case, whether this is fair or not, he added.

The IREPAS chairman also stated that the global long steel products market is depressed at the moment and added that many steel producers have already started slowing down their operations, extending maintenance and idling facilities.

On the last day of the conference, producers of long steel products, as well as traders and raw material suppliers, shared the conclusions reached at their special committee meetings regarding the current situation in the markets with the general participants at the event.

Raw Material Suppliers at IREPAS: Trade barriers contribute to slower growth

Jens Björkman, the chairman of the raw material suppliers committee, said that scrap prices have seen dramatic decreases in past months. He added that trade barriers are negatively affecting growth and in turn scrap generation. Trade conflicts between the US and China, Turkey and the US, and South Korea and Japan have all contributed to slower growth in the past year.

Commenting on Russia’s quota and license system for scrap exports, Mr. Björkman said that this will limit scrap availability from Russia, affecting tonnages. He pointed out that the quota and license system creates a bit of confusion as it depends on the exporting region, while he added that scrap exports from Russia are expected to be 30-50 percent lower.

Björkman also highlighted the issue of the new International Maritime Organization (IMO) regulation, that will limit sulphur dioxide emissions as of January 1, 2020, explaining that this will raise logistics costs and indeed has already done so, as the number of ocean-going vessels has been reduced to comply with this new rule, and significant price hikes in logistics costs have been witnessed in recent months.

He also pointed out that the slowdown in the automotive industry is affecting the whole supply chain, posing a very big challenge for recyclers as it is one of the largest industries that recycle. The committee chairman said that another problem last year was German recyclers’ insufficient capacity for incineration, which is used to get rid of organic waste from the shredding process.

He went on to say that the major challenge for the raw materials segment is the recession in Turkey, with demand for construction steel declining and scrap demand going down as well. Mr. Björkman said he thought this situation is likely to continue for at least one more year and will result in lower scrap prices amid reduced demand. He added that scrap suppliers have already witnessed a 15-20 percent decline in scrap inflow and indicated that this trend is expected to continue.

Regarding the declines in iron ore prices, the committee chairman said that there is still a structural deficit when it comes to iron ore supply. Although he said that it is difficult to talk about prices for the long term, he stated that current iron ore availability is below necessary levels because of the Vale dam disaster.

Traders at IREPAS agree EU quota changes specifically target Turkey

Wilhelm Alff from Duferco, the chairman of the traders committee, said that the main question is whether the trade conflict between the US and China is coming to an end. He expressed the view that it will probably go on as long as the administrations do not change. “In any case, the result will not change much as China is not in the US market,” Mr. Alff said. Commenting on the possible reduction in the US of antidumping duties on Turkish rebar, the committee chairman said that this will not help because Turkey cannot compete with domestic producers nor with Mexico which has zero duty. Against this backdrop of trade barriers, he said the role of a trader is becoming more vital as the trader acts as a risk-taker.

He pointed out that electric arc furnaces have a $40-50/mt price advantage compared to blast furnaces and said that the traders committee expects that this gap will become more balanced in the near future as they believe the downtrend in scrap prices seems to reaching the end.

Mr. Alff said that, with Turkey reducing capacity utilization to approximately 50 percent, a substantial reduction has been seen in the material which is available in the market. He added that, as the US and EU markets are closed, Turkish mills are looking to the Far East, Yemen, Israel and Africa. Turkish exporters have already taken away some market shares from the Chinese mills who had been dominant in the Far Eastern markets. The Duferco official pointed out that, although Chinese mills have increased their production, most of this has been consumed domestically and put into stocks.

The committee chairman said that China will not be entirely absent from the market in terms of long products, but definitely they can hardly compete with Turkey and Middle Eastern countries. Turkey seems to be in a better position today in the ASEAN region; however, it is out of necessity rather than out of desire, he noted.

Commenting on the recent changes in the EU safeguard duty, Alff agreed that the changes are specifically targeting Turkey. He went on to point out that, while determining the quota, the EU left out the year when Turkey had exported the most products to the EU and that, as a result, Turkey got a relatively small quota. He also remarked that there are other countries concerning which you would wonder why they received a large quota that they will probably never use.

Producers at IREPAS: Only bright spot is possible reduction in US AD rates on Turkish rebar

Murat Cebecioğlu, chairman of IREPAS and also of the producers committee, said that during the producers committee meeting the main topic under discussion was protectionism. Recalling that the due to tariffs in the US it is not possible for Turkey to export to this market, he pointed out, however, that the preliminary results of the AD review in the US on Turkish rebar signal that the duty rates might come down. Mr. Cebecioğlu said that, if this happens, it will help Turkish exporters. He added that trade measures have changed the way business is shaped. “Exporters become importers and imports become exporters,” he noted.

The IREPAS chairman stated that most Turkish producers are slowing down their operations or are extending maintenance periods. He went on to remark that, with the major markets closed, Turkey is left with South America and Africa for its exports, while the number one and number two markets for Turkish exports are currently Yemen and Israel. “At the moment, things do not look so bright, if protectionist measures keep on like this,” he said. He added that the only bright spot is the antidumping duty review in the US. Given the fact that the EU is trying to toughen the rules on safeguards, he said that he did not really know what to expect but commented that “things are not good at the moment”.

Amid difficulties in finished steel sales, Turkish exporters have turned to billet exports. The producers committee chairman said that, if the current situation continues, Turkish billet exports might see further increases.

Commenting on the possible change in the US tariff on Turkish steel, Mr. Cebecioğlu said that, if the tariffs are replaced with a quota, this will be to Turkey’s advantage, although he said he did not know which year they would take into consideration to set up quotas. He said he hoped a quota is established, though adding that he did not know what the US side will ask in return.

Regarding the new changes suggested in billet import duty in Egypt, Cebecioğlu said that a 50 percent reduction in the duty rate would give importers relief as Egypt has traditionally been a billet import market.

Mr. Cebecioglu added that there is positive sentiment among the European based steel producers as there is certain growth in Europe but it certainly is not enough.

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