Short Range Outlook : December 2023

Global longs producers face various cost increases amid insufficient demand

There has been some increase in demand-driven purchases in the global long steel products market but the question is whether consumption will continue to follow. We are in the holiday season and therefore not much demand is expected for the rest of the year. The winter season will also push up energy prices and, overall, mills will face cost increases. EAF-based steel mills’ costs have gone up substantially with the unexpected increase in raw material costs and the seasonal increase in energy prices. Mills have no choice but to increase their prices or reduce production even more.

Scrap price surge driven more by supply than demand

It was surprising to see scrap prices exceeding $400/mt because demand for reinforcing bars is very low and the weather is getting colder. Consequently, the increase must be more supply-driven than demand-driven. The rise in scrap prices did push up billet and rebar prices, though the question is how long and how far this can hold.

Chinese exports still exert pressure, may be limited by stronger currency and stimulus

Exports from China are stable at high levels and still exert pressure on many destinations, but the main positive factor in terms of the global market is that at least China is not increasing its exports.  The Chinese government has released a huge stimulus package in order to reactivate housing and investments in real estate projects of any kind. The Chinese currency has gained some strength. The futures market in China also moved up, but the impact on the physical side is at least for the time being not what it was supposed to be. It seems like the recent stimulus package and the strengthening currency will prevent any additional Chinese exports. However, the current level of about 8 million tons of steel product exported from China to the global markets is still a lot.

US market generally steady, winter season adversely impacts buying

The US will reach approximately 90 million net tons of liquid steel production in 2023, slightly less than in 2022. Yet their prices for flat products are increasing dramatically, but their long product prices are more or less stable. The US market is generally steady, but housing and commercial construction is still down due to high interest rates. Prices are moving up due to scrap prices, but the upward movement does not seem to be sustainable. The end of the year and the winter conditions are also adversely affecting buying. Conditions are very different for flat products, where inventories are low and new demand due to the end of the strike in the auto sector has helped increase prices.

Downstream margins high in US, nearly non-existent in EU

Margins in the US are high on the downstream side, yet in the EU margins seem not to exist for downstream benders and cutters. Benders in Germany have started to close down sites to reduce capacity as market sentiment for the coming years looks set to go from bad to worse.

Prices in EU show some signs of increasing, supply pressure reduced

Prices for many steel products have stopped falling in Europe and some show signs of increases. The EU is discussing a soft landing now. Algeria seems to be out of the market, reducing the supply pressure for a while due to the excellent circumstances in their domestic market. In general, stocks are low in the market and customers will have to restock.

Decisions still need to be taken to tackle CO2 emissions

Steel industry seems to be united on the need to lower CO2 emissions, but it is not yet known what the best way is. Partnerships on this issue should increase the chances for success.

Competition still high in the market, remains more regional than global

Competition is still high in the market and is more regional than global. The current status of the market can be described as stable in Europe but tough also as it is not easy to increase prices on the back of rising costs in a low demand environment. However, the market is unstable elsewhere and even fluctuating in the US.

Outlook for next quarter unpromising and challenging, except in US

The outlook for the next quarter is not promising and is challenging with the exception of the US where it is satisfactory.




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