Uncertainty spikes further in global longs market due to 50 percent tariffs in US

The business environment in the global long steel products market, particularly in terms of the demand and supply balance, has not improved meaningfully. Other than that, the situation has worsened as the Trump Administration’s increase of US import duties up to 50 percent caught many exporters off guard. The uncertainty created by the Trump administration by doubling tariffs is terrific for those who are protected and terrifying for those under attack. These sudden changes in duties and tariffs make exporters to the US think twice about exporting and make it very difficult to come to a decision.

Buyers wait and see as outcome of talks awaited

Rumours about talks with Mexico and Canada and other countries’ approach to the US administration to see if they can obtain an exemption in any sense have put buyers into wait-and-see mode. On the other hand, huge debates and negotiations are being carried on between suppliers, receivers, and traders about who should be responsible for the extra burden for those cargoes which arrived at US ports after tariffs were raised to 50 percent.

Importers into US face serious difficulties

Importers into the US continue to face serious challenges, especially with cargoes already on the water or ready for shipment under L/C terms. Many are forced to either absorb heavy losses or cancel shipments altogether.

Prices creep up in US due to new 50 percent tariffs, consumers frustrated

In the US, demand remains moderate, but prices have started to creep up – largely due to the protection of the newly imposed 50 percent duty on all steel imports. Despite this, domestic prices are still not strong enough to justify new import orders. Meanwhile, persistently high interest rates are discouraging new investments and slowing down construction activity. In summary, aside from a few US domestic mills benefiting from the current trade environment, most steel consumers and processors remain frustrated with the situation.

Impossible to compete with exports from China and SE Asia

Elsewhere, it is not possible to compete with exports from China and Southeast Asia. Stimulus programs to help the market in China have not been effective at all. We can assume they will keep exporting heavily, which will mainly hit the other exporters in the region.

Europe flooded with cheap imports, regional mills face high costs

The weak dollar and displaced tons from Asia have encouraged imports and so Europe is flooded with cheap imported steel, while energy costs for European mills have gone up. Buyers have taken early and extended holidays, but scrap prices stay high. European mills are not able to cover melting costs. Unless demand picks up after the summer break, production cuts are likely.

Expectations of interest rate cuts provide some glimmer of hope

There is still some hope among market players that some of the recently announced tariffs will backfire. Expected interest rate cuts may be the only positive so far. However, it seems the US Federal Reserve will wait a little longer to see the impact of tariffs on inflation. Interest rate cuts are also expected in Turkey, though demand there is still low. The only activity is seen in construction in the earthquake-hit region and in the renewal of old buildings.

Market status unstable, short-term outlook unsatisfactory

The current status of the market can be described as unstable and the competition in the market is very strong all around. It is very difficult to predict the outlook of the market under the prevailing uncertainty created in the market. The market is structurally weak. Nothing will probably drive the market during July and August until the start of September. Accordingly, the short-term outlook for the market is unsatisfactory.

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