According to the market outlook released by IREPAS, the global association of producers and exporters of long steel products, the market situation for long steel products has worsened due to supply pressure. Even though there were many announcements by mills indicating production/supply cuts during the last few months, apparently these have not been sufficient to improve the supply and demand balance in the market.
IREPAS said that, while most buyers started to have lower price expectations, later positive news coming from China has helped to improve sentiment in the market while at the same time production growth has also been slowing down globally.
Demand for raw materials has been healthy lately as steel mills have been trying to build inventory before the start of winter in the northern hemisphere and related potential price increases. The increases in ferrous scrap and iron ore prices have also helped to improve the market sentiment in the long products market. The demand in the market has picked up recently due to customer expectations that long product prices may increase as well. Consequently, supply pressure has been eased up to a certain extent as many mills have quickly filled their order books and others are holding back waiting for higher prices.
The market in general is thought to have reached the bottom of the most recent downward trend. Iron ore prices have moved back up to $120/mt, and the Chinese finished product market has been indicating stabilized prices recently. Demand in the international billet market has also been showing signs of improvement, while scrap prices have been moving up due to increased demand for scrap. In addition, Hurricane Sandy has had a negative impact on scrap collection and shipments from the US East Coast, putting more pressure on the market.
The level of competition is still very high in the marketplace as many producers need to sell. Demand in the market may still be considered to be low despite the recent trend and therefore the long product market situation can be described as unstable and fluctuating even though there is some improving sentiment. On the other hand, there is satisfactory demand for scrap in the market.
According to IREPAS, the market is expected to move in line with expectations in November, but may improve in volumes as it is starting to show signs of recovery. Prices for immediate deliveries may be considered to be low, but contract prices for future deliveries should be at higher levels.
The European market is still weak but increased activity is expected in coming weeks. Many companies will continue to the end of the year with low inventories, while replenishment purchases to arrive by the beginning of 2013 are being considered in certain markets.
Certain upward movements in China and some improvements in the US market are also expected.
The weather conditions will play a huge role in the scrap market. A severe winter season would slow down scrap collection and may result in a supply shortage.