Short Range Outlook : February 2024

Some decisive positive developments still awaited in global longs market

It seems like everybody in the global long steel products is waiting for some really positive developments to materialize. However, unfortunately, there is no substantive positive news coming out of China. Nevertheless, the country is driving iron ore prices and coal prices, while many long product mills are working to keep margins between scrap and finished products on the plus side. Meanwhile, China is reporting that rebar produced by both EAF-based and BF-based producers in the country are being transacted without positive margins.

Longs demand in EU hit by variety of negative factors

EU import quotas for wire rod were oversubscribed by early January. Overall, demand was down by 17 percent for reinforcing bars and down 10 percent for wire rods in Europe, but Germany was affected the worst. The reasons are, of course, high interest rates, higher costs and the increase of bureaucracy due to environmental regulations by Brussels and local governments. EU mills’ prices have increased slightly due to costs. Going forward, a lot of wire rod and reinforcing bar shipments are expected from North Africa and Turkey.

Turkey’s longs exports to Israel under threat, new safeguard impacts wire rod imports

The political dispute between Israel and Turkey may affect Turkish mills’ biggest export market. The recently announced safeguard measure against wire rod imports in Turkey has practically closed opportunities for wire rod imports since the import duty is quite high for the regularly purchased origins, while the quotas will be viable businesswise only for supplies from some countries. It is highly likely that imports from Egypt and Malaysia will now be excluded from the Turkish market. Russian exports will also be halted unless the Russian mills agree to absorb the $175/mt tax.

Positive sentiment prevails in US longs market

Demand in the US has not changed much. However, as interest rates are coming down, sentiment in the markets is upbeat. The mood is positive in particular in residential  construction. As for imports, there are only two countries, Egypt and Algeria, that are exporting some volumes to the US. The long-standing traditional exporter, Turkey, is not  competitive anymore due to very high antidumping rates.

Longs producers in US happy with prices and volumes

The US is certainly an outlier, spreading higher prices to Canada and Mexico.  The margins between prices of scrap and sheet are euphoric, while no long product producer in the US can complain about selling prices and less-than-decent volumes.

Interest rate cuts, if enacted, could give boost

Inflation seems to be going down in the US and the EU. If central banks start reducing interest rates, it may give a serious boost to economies once again.

Fears of recession and geopolitical uncertainties add to negativity

Other than the abovementioned factors, there are not many positives in the market due to the seasonal slowdown in most of the world and recessions in many countries as well  as political uncertainties. There are two full-scale wars going on and Red Sea interruptions have now added to the cost of shipping, making business even harder. Generally,  there is a high risk of markets becoming even more local due to trade route disruptions such as those in the Red Sea and also in the Panama Canal.

Competition becomes more and more local

Competition in the market is becoming more and more local. Most would say it is difficult to compete as you start with a loss and stay with a loss if you transact any new kind of business. Some close-by repetitive business keeps most mills afloat.

Market status mostly stable but low, outlook is challenging

Under these circumstances, the current status of the market can be described as mostly stable but on the low side, while the outlook is challenging and slow.




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