Short Range Outlook : April 2021

Producers dominate in global longs market, outlook appears very positive

Lead times are longer than ever in the global long steel products market and there is still strong demand, encouraging mills to continue increasing their prices. The situation has certainly become better from the producers’ point of view. They are all making money and their lead times are elongated.

Shortages of material keeps prices and margins high

It was somewhat surprising to see that the steel output outside China had not increased during the first two months of the year compared to the same period last year, despite the increases reported in India, South Korea, Turkey and Brazil. Outputs in the US, Japan, Russia, Germany, Taiwan and France were all lower year on year. That means there is still a shortage of material, which keeps prices and margins high. Meanwhile, output in China increased by 13 percent year on year, though it seems China will continue consuming at similar rates compared to last year.

Strong demand also supports price rises across the world

There are still shortages for many products in the global market, which are exacerbated by the disruptions in logistical and shipping chains. Customers are buying less than what they need, but these local shortages keep pushing the markets up. Prices keep on climbing in most areas across the world as demand is strong.

EU longs mills enjoy good order books, price increases to gain momentum

The long steel products market in the EU is very stable and EU mills are enjoying good order books. The reduced number of offers and stronger seasonal demand will speed up price increases. The hand-to-mouth buying mood of EU clients is good for local mills as they can adjust their prices instantly depending on the cost and sales situation. The termination of safeguard measures in the EU on July 1 – if it were to happen – would most probably not create a flood of imports under the current circumstances.

US mills enjoy high margins and high capacity utilizations, importers still struggle

On the other hand, US domestic mills are enjoying very high margins with high capacity utilizations and the ability to take any business from imports at will. The situation has become even worse for importers in the US. Most supplying mills are booked full. The availability of products is three to four months for flat rolled products and a minimum of two months for long steel products. In addition, the availability of vessels is even worse, making shipping more difficult. Prices for all commodities are high and now shipping costs are hitting an all-time high. With all these factors, importers are finding it even more difficult to make projections for future business. It is not clear how long all this will last.

China keeps importing, its billet buying gives global market additional strength

China seems to be happy with its situation and is not interested in increasing exports, but instead keeps importing. Their new five-year plan promises considerable public spending on many projects. China’s buying of billets gives the global market additional strength.

Hopes rise amid vaccinations, stimuli, US infrastructure bill and low Chinese exports

Although we are in the third wave of the pandemic, vaccinations are boosting hopes and the positive mood is helping demand to stay strong. There is an expectation that post-pandemic government stimulus programs will be hitting consumer products and construction markets soon. In addition, the expected US infrastructure bill and China’s timid export behaviour are the main positives for the second and third quarters of the year. It seems the current prices will hold for the next three months and that reductions will be gradual rather than sudden.

Competition mainly seen among buyers, not suppliers

Tight availability from most exporting countries and companies is affecting the level of competition in most markets. On a regional level, competition is very limited due to long lead times, but it is still healthy. From a global perspective, there is very little competition as transportation costs are skyrocketing. The only competition that exists today is the competition among buyers.

Market is generally stable, outlook is very good and satisfactory

Even though there may be some fluctuations, the current status of the market is generally stable. Most market players have convinced themselves that Covid-19 is now in the past tense. Whether we are in for lots of unpleasant surprises is unknown. The second quarter should be better than the first quarter. Accordingly, the outlook of the market is very good and satisfactory.




Leave A Comment