Short Range Outlook : July 2022

Demand mostly very weak in global longs market, unlikely to improve in July and August

It has become very complicated nowadays to use the word global when talking about the global long steel products market. It seems like there are different globes. Demand has disappeared almost everywhere and commodity prices are down, which definitely forces mills to slow down. The main issue for steel producers is volume and profitability. Adding salt to the wound, July and August are usually the most difficult months for increasing prices and maintaining volumes.

Chinese mills barely making money, ex-Russia supply creates great difficulties for Turkish mills

Steel mills in China are barely making money, while volumes are being suppressed both politically and by business decisions. Trade barriers into the EU, UK and US markets still exist, and supply from Russia is causing big trouble for Turkish mills.

Risks of Q4 energy shortages give some support for demand in EU

Demand has rebounded in the EU amid the risk of energy shortages in the fourth quarter of 2022 and is higher than usual in the holiday season. Of course, it must be seen how long this situation will continue. In fact, demand for long products as well as prices in the EU are probably higher than anywhere else, but the safeguard measures prevent imports of steel which are so necessary, especially these days. Other areas in the world have a big cost advantage as steel products are much lower in price and are giving benefit also to downstream industry and investors.

Domestic mills dominate market in the US with their faster deliveries

Demand in the US market is the same, but with fast changing raw material prices causing HRC prices to come down. Others have started to follow. The reinforcing bar market is holding its ground somewhat but is expected to come down as well. With the expectation that all prices will come down, future sales have become impossible, which is basically what imports are all about. Finally, after a sharp drop, by early July, import cost prices started to go up in parallel with scrap prices. In short, the US has become an even more difficult market for imports. Naturally, domestic mills with faster deliveries dominate the market.

Rebound in scrap prices sends a positive signal

Scrap has rebounded from very low levels, sending a positive signal to the market. However, the market is still very quiet.

Low inventories boost mills’ hopes for Q4, prices start to move to more sustainable levels

The low inventory levels in the market keep steel mills’ hopes alive for the fourth quarter, in addition to the news that Russian mills have reduced their export volumes due to their very strong local currency. Prices have started to move from very low and unhealthy levels to more sustainable levels.

Competition is either non-existent or very difficult, market can be described as unstable

The competition in the market is either non-existent or very difficult depending on where you are. There are a lot of challenges in the market and September is fast approaching with great uncertainty. Under these circumstances, the global long steel market can be described as unstable.

Outlook is unsatisfactory, but buyers to replenish stocks at end of August or start of September

The outlook may also be described as unsatisfactory. However, given the very low stock levels and hand-to-mouth sales, buyers will have to replenish stocks at some point, most probably at the end of August or the beginning of September.




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