Short Range Outlook : July 2024

Lack of Chinese government action could cause great damage to global longs industry

The supply and demand balance in the global long steel products market is becoming more unstable, with China now actively moving steel billets at the lowest prices. Finished products from China continue to dominate most markets, both in the long and flat segments. Even though there is a lot of material being offered in the market, it seems that the current raw material price levels are supporting prices. What we are going through today keeps reminding us of what the market went through 10 years ago. So far, there is no sign from China of a slowing down of production or of exports. If the Chinese continue in the same way for another year or two, it will surely cause big damage to the global steel industry.

Weakness in Asia continues to undermine global steel markets

The weakness in Asia, most importantly in China, continues to undermine the steel markets. Due to low capacity utilization rates and excess stocks of raw materials at Chinese ports, BOF-based producers managed to push through lower prices for iron ore and coke, which in turn helped to push down the prices of finished products. The weakness in Asia is continuing to spread to the rest of the world.

Scrap costs increase for EAF-based mills

For EAF-based mills, the situation is the opposite. Because of the changes in the quota system in the EU, Turkish mills managed to sell good quantities of material to the region. But the scrap market is very tight. So, just a few purchases of scrap have pushed up prices in the scrap market, at least for the time being.

Will scrap remain so costly? Will China take steps that will change the market dramatically?

Going forward, demand remains weak, EAF-based mills struggle to compete with BOFs and it is hard to imagine how scrap can remain so expensive. The weakness in China is built into market expectations all over the world. Unless the central government in China comes up with measures that would change the market dramatically, it is hard to imagine how the market might improve.

Demand at very low levels in Europe, global freight prices stable and competitive

Demand in Europe seems to be at the lowest levels, with no sign of any improvement. The freight market seems to be stable, with competitive fares.

Turkish rebar exports up 15 percent from 2023, but still down from previous years

Turkish rebar exports are up by 15 percent (1.5 million mt) compared to last year, but they are still down 20 percent compared to the year before and less than half compared to the previous usual export volumes of 6-7 million mt per annum. The absence of the Israeli market for Turkish exporters will be felt more sharply in the second half of the year

Longs prices in US under pressure from domestic competition, but margins still healthy

As for the US, business conditions have not changed, but due to the Fourth of July holiday week and the July vacations, most buyers have been reluctant to make big purchases. Commercial and residential construction is still slow due to high interest rates, but infrastructure projects continue at normal speed. Long product prices are under pressure from domestic competition rather than from imports.  Flat product prices have kept going down even more than long products, but this situation may change soon. US domestic mills still operate with very healthy margins in spite of the competition.

Competition stable at high levels, Chinese leave little breathing space

The competition in the market is stable at high levels, with Chinese exports leaving no breathing space for others.

Market very unstable, outlook not so promising, question mark over China

Under these circumstances, the market is quite unstable and fluctuating, with a not so promising outlook, as nobody can foresee what official decisions will be taken in China in July.




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