Short Range Outlook : March 2021

Spring brings generally bright prospects for global long steel market

The current situation and sentiments are generally very good in the global long steel products market. Order books are mostly filled to above average levels. The holiday season is over, winter in the northern hemisphere is coming to an end and vaccinations are progressing. These factors as well as stimulus activities, a will to return to normal, and strong investments are all strong positives for the global long steel products market. With production increasing in many parts of the world at once, commodities, raw materials and steel will continue to be in high demand during the spring.

Producers eager to raise outputs amid strong price trends

Everyone in the market is working to make more steel to take advantage of the current situation. Iron ore-based producers are starting up blast furnaces, which will come on stream over the longer term. Steelmaking raw materials and commodities like oil are trading on strong price trends. There are historic metal margins for flat products, and difficult margins for most long product markets.

Tight supply and reopening of economies drive inflationary pressure

Very tight supply chains in general and the continued path towards the reopening of economies are driving inflationary pressure on everything from commodities to freights. Winter conditions in Europe and the US in February were logistically troubling. Semiconductor shortages slowed down automotive production, with limited scrap availability as a result.

EU steel prices close to 2008 peak, but EUROFER still seeks safeguard extension

Imports have dropped to historically low numbers in the EU because of the prevailing safeguard measures. As a consequence, the downstream industry is facing trouble in finding the grades and volumes they need. Steel prices in the EU market are almost as high as at the peak in 2008 and international prices are even higher or equal to EU domestic prices. Moreover, China – the preferred enemy of EUROFER – is not really interested in exports anymore but is seeking to cut back steel output. China may also cut back the tax rebates on exports, which would certainly have a further negative impact on export volumes from China. Under these circumstances, there does not seem to be any threat of imports for the EU domestic market. Nevertheless, EUROFER is still pushing for an extension of the EU safeguard measures.

Importers under pressure in US market

The current situation seems only to be worsening from the importers’ point of view in the US market. In addition to supply shortages, importers are now dealing with shipping difficulties, especially as regards obtaining containers and serious local port congestions. Both material and shipping prices are at historic highs, recalling 2008. Most domestic mills are fully booked through May and June, thus making future sales even more difficult. It is now clear that the Biden Administration will not immediately change the trade restrictions imposed by former president Trump. Overall, difficult times continue for the importers.

China to step up focus on EAF-based output, raising pressure on scrap prices

China has already returned from its New Year holiday in a positive mood that has helped demand to resume and prices to pick up. This will also be supported by warmer weather conditions. China is starting to reduce steel output to fulfil environmental targets and aims to reduce pollution by 40 percent by the end of 2021. Accordingly, BOF plants will reduce capacity utilization, while EAF plants will take over this share of production. A likely consequence of this will be to increase pressure on ferrous scrap prices.

Competition relatively good in global longs market

Competition in the global long steel market is in a relatively good condition. The only exception is the import market in the US where competition is still high. Elsewhere, the principal exporters are still exporting, while the principal importers are again importing. Asia looks like becoming more competitive in billets and reinforcing bars. Producers are mostly relaxed these days, though in the coming months the effect of all those blast furnaces being refired within the past month or so will start to be felt in the market.

EU domestic mills in a strong position

There is not much competition in the EU right now. The mills in the EU are aware that a lot of material still has to be bought shortly as stocks at many benders are empty. As quotas are tight and rumours of an extension of safeguard measures already exist, domestic mills can sit back and wait until buyers are obliged to make a move. In the meantime, the mills have to watch out for opportunistic exporters from other regions.

Ex-EU scrap supply reduced amid strong intra-European demand

Exports of ferrous scrap from Europe are slower due to intra-European demand being strong. European political activity and industry protectionist efforts to limit scrap exports from Europe are troubling and pose a risk for free trade going forward should they succeed, even if partly.

Outlook for next quarter much better compared to last year

The outlook for the next quarter is much better compared to last year, and is very good for most of the market. The market can generally be described as all set to prosper, with the exception of the import market in the US which still is unstable.

How permanent will demand be and how quickly can supply be adjusted?

European construction activities almost proceeded at 100 percent levels amid the mild winter conditions. The market has the potential to be very strong in the second quarter. There is sufficient demand for long products worldwide despite the pandemic. The relevant questions now are; how permanent will demand be and can supply to the market be adjusted quickly enough when demand decreases? The outlook for the US market may still be considered to be an exception. Two big infrastructure projects, one in California and one in New York were taken out from the US$ 1.9 trillion stimulus and the increase in infrastructure spending has been delayed.




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