Short Range Outlook : May 2022

Global longs market faces challenges and uncertainties amid ongoing war in Ukraine

Some oversupply is observed here and there in the global long steel products market. The market situation is getting worse. In particular, there is a vacuum in Western markets due to the war in Ukraine. Price hikes were very rapid and very steep, which could be a reason. Energy prices have negatively impacted manufacturing, especially in Europe. Inflation is another factor which has also been having a negative impact on consumption, though it is still difficult to comprehend why the market has been so silent during recent weeks and to understand what has been causing prices of scrap to drop by such significant margins.

Reinforcing bar mills in EU in good position to keep prices at high levels

Reinforcing bar mills in the EU are in a good position to maintain their prices at high levels despite lower demand and internationally weakening prices, as Turkish and Algerian imports have been out of the market since quotas expired as of early April.

Lack of clarity in EU on lifting of safeguards or quota increases for some products

There is still no signal from Brussels regarding the lifting of safeguards or increases in quota volumes for certain products. Hence, offers are expected to stay tight. Brussels is responsible for the detrimental usage of the “all other countries” quota in April because of the strange handling of the Russian and Belorussian quotas.

Scrap price premium shrinks in April influenced by Russian semis supplies

The pricing premium on ferrous scrap, which was an effect of the Russian invasion of Ukraine, deteriorated during April as Russian semi-finished products have been able to find destinations in Asia and Turkey via trading intermediaries. Russian ferrous materials trade at a steep discount to other suppliers, with fewer destinations available. The March war premium was lost in April despite the war continuing and despite continued disruptions amid the ongoing brutality of the invasion.

Intra-European trade at good levels

Demand remains good in intra-European trade where supply in the long product market is insufficient compared to demand.

Strong dollar puts pressure on commodity and ferrous metals sectors

In uncertain times, a safe heaven is provided by the US dollar, which has been trading at a five-year high against the euro. This has been putting pressure on the commodity and ferrous metals sectors as well.

Chinese lockdowns put pressure on global raw material prices

There has been a slowdown in China due to the Covid lockdowns and property developers still being in trouble after the Evergrande crisis. The majority of the Chinese population is still affected by lockdowns due to China’s zero Covid strategy. The lockdowns have also had a negative impact on demand and prices, with global raw material prices coming under pressure.

Margins for producers and users still very good, post-Covid situation in West a positive

The margins for producers and users worldwide are still very good, with Ramadan now over and production growth in China still negative. The pandemic is almost over, at least in the Western world. The post-Covid situation in major markets remains a positive, which boosts consumption.

Russian exports disrupt pricing, war in Ukraine contributes to uncertainty

Competition in the global longs market remains very regional due to trade measures. But Russian exports have been causing significant disruptions as far as pricing is concerned. The war in Ukraine and the worldwide uncertainty does not help the markets to resume their normal business mode. The situation is very challenging when trade is very intermittent and so competition is not very intense.

Market situation unstable though outlook satisfactory despite challenges

The current situation in the market can be described as fluctuating and unstable as market demand is intermittent. The outlook, however, is still very good and satisfactory despite being challenging in certain regions.




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