Short Range Outlook : November 2021

Supply and demand balanced in global longs market, energy costs and logistics bring uncertainties

Supply and demand are balanced in the global long steel products market, as regional producers are now back to almost normal lead times.  Energy prices are soaring and logistical challenges have made business more uncertain, though underlying demand remains solid in Europe and North America. The ongoing weakness in China may slow its imports, which could negatively affect general sentiment. Inflationary pressure and soaring energy prices are observed around the world and especially in emerging markets where demand is normally strong.

New US-EU deal could bring opportunities for European longs producers

The new agreement between the US and the EU may open opportunities to see more EU origin reinforcing bars and wire rods in the US market, which may provide relief for EU mills, which are currently suffering from high energy prices. However, it seems that the EU long product mills do not have much appetite for exports to the US market, at least for the time being. The quotas to be given to the EU mills will not be large and the specifications required by the US market are not ideal for EU mills. Incredibly high freight costs constitute another negative factor. The scope of international business in the US depends on the country exporting to this market. Prices in the EU are already high and immediate capacities are full, and so no significant impact on prices can be expected until the third quarter. In addition, because the quantity for export will be limited to 3.3 million mt, the incentive to sell at low prices will be eliminated.

Protectionism foreseen to continue, with more regionalization of trade

On the other hand, the US-EU agreement confirms that protectionist measures will unfortunately continue. The US and EU are forming a new structure to trade to each other and to leave others out. Business is now going to be even more regional and this will affect the whole supply chain. More trade cases, also even for downstream products, can be expected to be filed.

Congestion in shipping and at ports still a major negative factor worldwide

For the rest of the world, the main negative factor is still the congestion in shipping and at ports. Any contract that was done in the second quarter now faces huge shipping costs, thus making the contract unprofitable. With this and the tightening of scrap prices, one can expect domestic long products in the US market to continue to remain strong even in the first quarter next year.

Asian markets see swing movements, centre of gravity moves more to Asia

The Asian markets, including the Asian subcontinent, have continued to see swing movements in buying and selling. It feels like the centre of gravity is moving more towards what we all expect from Asia.

Overall demand expected to remain good in 2022

Regional demand is strong for long products and raw materials. Overall demand is expected to remain good in 2022. Stocks in the EU have been replenished and demand is back to normal and so is supply. This situation will prevail throughout 2022 as investments are popping up all over the place. Moreover, it seems like China is going to keep its promise to limit steel production to last year’s level. Miners, steelmakers, consumers and service centres are all making money.

Greater focus now on environmental impact of steel production

The awakening of many steel producing countries to the environmental impact of steel production is a very good sign. Starting with the largest producer China, the EU and the US have now begun to pay attention to environmental impacts, adding new restrictions. Though this is positive for the Earth, it will certainly increase the cost of steel production and will add more regulations for traders.

Competition in global longs market appears to be lower

Competition in the global long products market appears to be lower, most probably due to all the current trade measures. As for raw materials, competition is generally in a good solid condition.

Global longs market stable despite many uncertainties

The global long steel products market is stable at the moment despite many uncertainties including power shortages and costs, the Evergrande case in China, and the US-EU deal.

Outlook for next quarter is satisfactory, new capacities in 2022 need to be watched

The outlook for the global long steel market for the next quarter is satisfactory and surprisingly stable. There is a lot of downtime being scheduled for November and December, and important new capacities will be coming on to the market in 2022. It will be critical to see if these new capacities will find new customers.




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