IREPAS in Berlin : Weak demand, great uncertainty and aggressive Asian exports

The 90th meeting of IREPAS (the International Rebar Exporters and Producers Association) was held in Berlin on April 28-30 in conjunction with the SteelOrbis Spring’24 Conference. There were 104 representatives from 41 different producers among the 445 registered delegates from a total of 57 different countries. There were also 91 registrations representing 52 different raw material suppliers.

At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that demand in the global long steel products market continues to lag behind supply. He added that the situation was getting worse because of China’s aggressive export policy and that Chinese exporters would continue to be aggressive, which of course would drive other Asian exporters to be aggressive also.

The IREPAS chairman said the situation in the global long steel products market is deteriorating, adding that there is huge uncertainty on what the next couple of quarters will bring for the global long products market, where it seems the situation will be extremely difficult.

On the last day of the conference, producers of long steel products, as well as traders and raw material suppliers, shared the conclusions reached at their special committee meetings regarding the current situation in the markets with the general participants at the event.

Raw Material Suppliers at IREPAS: General market mood hopeful for improvement

Jens Björkman, the chairman of the raw material suppliers committee, summarized the committee meeting findings regarding the general situation in the global steel and raw material markets, noting that the markets have been struggling this year compared to the past few years amid the worsening of economies due to high inflation and interest rates. However, he stated that the general mood is hopeful for a return to something slightly more forward-looking and optimistic.

Regarding Western countries, he stated that high interest rates and inflation have been putting pressure on scrap generation in the US and the EU, and added that the interest rates in the EU are expected to be cut during the spring. With the anticipated increase in scrap demand due to electric arc furnace investments especially in the US, Canada and Europe, Mr. Björkman noted that scrap flows will change significantly in the next 10 years, regionalizing scrap generation where scrap demand is high. In addition, he stated that steel producers have started to look for alternatives to scrap like pig iron, HBI and DRI to cover their needs for raw material. Indicating that scrap generation in Europe is down by 15-50 percent depending on the part of the region, Björkman said that, with the Carbon Border Adjustment Mechanism (CBAM), European scrap suppliers will try to keep scrap volumes within the regional market, reducing scrap exports from the region especially to Turkey, which operates mostly with electric arc furnaces and has significant demand for scrap.

Looking at China, noting that the country’s economy was expected to rebound after the Chinese New Year holiday but that these expectations did not materialize, he stated that China’s economy is going through a period of normalization. Meanwhile, pointing out that before the recent rebound iron ore prices had fallen to $100/mt CFR in the first quarter this year from the higher-than-expected level last year of $120/mt CFR, he said that the factors contributing to the price drop included high iron ore inventories at Chinese ports, slow demand and lower steel production. He concluded by saying that the market in China is adjusting to the lack of recovery of demand after the Chinese New Year holiday, adding that he expects iron ore prices to remain at quite high levels.

Traders at IREPAS: Global demand to be supplied locally, market conditions lead to regionalization

F. D. Baysal, the chairman of the traders committee, stated that there is demand globally but that it will be supplied locally, adding that ongoing trade tensions, global conflicts and political instability have changed trade routes, resulting in regionalization.

Looking at the other factors that lead to regionalization, Mr. Baysal expressed the view that the EU’s safeguard measures will be extended for another two years and that its quota volume adjustment will be minimal if any. Regarding the EU’s Carbon Border Adjustment Mechanism, he stated that it will put pressure on other countries, especially on blast furnace-based producers.

Remarking that Turkey’s export markets have been limited due to the US safeguard measures, the EU quota restrictions and the geopolitical tensions in the Middle East, the chairman of the traders committee stated that there are still some export opportunities for the country, including Syria, Iraq, eastern Europe, Africa and possibly Yemen. In addition, noting that the shipping crisis in the Red Sea has affected freight rates and container shipments a lot more than bulk shipments, shipments had to be shifted from containers to bulk, leading to additional costs.

Looking at China, Baysal said that the low steel demand in the country amid cancelled infrastructure projects has resulted in an increase in the country’s exports, with China dominating the global market with its lower prices and higher quality of steel, leading the strong competition. He also cited the Chinese Metallurgical Industry Institute’s prediction for a 1.7 percent drop in China’s steel demand in 2024, after a 3.3 percent decline in 2023, while further noting that China’s steel export volume increased by 14 percent year on year in the first quarter, though the value of its steel exports during this period was down by 20 percent year on year.

Producers at IREPAS: Low demand and Chinese exports weigh heavily on global steel market

Murat Cebecioğlu, chairman of IREPAS and also chairman of the producers committee, shared with participants the conclusions reached by producers regarding the current situation in the markets. He said that the GCC region is more optimistic in terms of business given the big infrastructure projects in the pipeline there, while market conditions in Egypt are getting better and better as the country’s currency issue has mostly been resolved, though the Suez Canal crisis remains a challenge. In some EU markets, the economy is picking up and inflation seems to be under control, while in others demand still remains quite low.

Commenting on the situation in China, the hot topic at the conference, Mr. Cebecioğlu said that Chinese exports will definitely affect the global market negatively and will reach high levels as they did back in 2015. However, this time the number of export markets is limited because of protectionism and Chinese exports will be more problematic in terms of competition. He went on to say that, apart from China, Malaysia, Indonesia and Vietnam are also exporting heavily and competing with each other. This will affect other suppliers and, as one of the biggest long steel exporters, Turkey is already feeling the effects, the chairman of the producers committee noted. Chinese exports are also taking a toll on the EU market, which is also struggling with very low demand especially in the northern part of the region.

Other exporters to the EU have to deal with quota measures as well as the Chinese competition. Cebecioğlu said the EU will most probably extend its quotas for another two years and, with new suppliers such as the GCC and North Africa, things will be tough this year before picking up and getting better next year.

Responding to a question regarding how Turkish mills managed to increase production in the first quarter of the current year, the committee chairman said that, in terms of sales, the first quarter this year was much better than the corresponding period last year. Turkish mills were able to sell considerable amounts to the EU and, with the quotas opening up, they had a window for exports. Commenting on the reconstruction works in Turkey’s southern region which was devastated by earthquakes last year, Cebecioğlu stated, “Construction activity has already started in the region, and it is mainly the mills in the region that are benefitting from all this. Since export activity is very low, this gives these mills a little bit of a break, and also funding should not be a problem as these projects are being financed by the government.”

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