Producers and traders anticipate September uptrend in European and Middle East rebar markets

Friday, 15 August 2008 17:07:15 (GMT+3)   |  
       

Since Europe is enjoying its holiday period in August and has slowed down its business activities, end-user demand in the European rebar market is sluggish at the moment. Despite the supply reductions due to the mills' overhauling works or production slowdowns, given the continuously decreasing rebar prices, the European traders are feeling uncomfortable with their high stock levels and are only buying according to their needs. Italian and Spanish producers, who have been focusing on exports due to the low rebar prices in their own local markets, have been considering North African countries, as well as Greece and Romania, as target markets.

As regards Romania's domestic rebar market, price levels have fallen by approximately eight percent to €810-820/mt delivered to customer from last week's level of €880-890/mt delivered to customer: prices are excluding VAT. For this reason, besides the countries exporting to the Romanian market such as Italy, Poland and Spain, the Turkish producers wishing to increase their share in this market have reduced their offers by around $150/mt compared to last week. The offers in question from the Turkish producers are currently at $1,150/mt CFR, whereas they were at $1,300/mt CFR two weeks ago. It seems that there will likely be offers at $1,100/mt CFR as of next week.

Rebar price levels in the Bulgarian domestic market have also declined considerably compared to last week, dropping by approximately €50-60/mt to €770-780/mt ex-warehouse/delivered to customer from last week's level of €825-835/mt ex-warehouse/delivered to customer. Rebar price levels in this country have declined for a number of reasons: the slowdown in the end-user demand level during the past two months, the offers to local traders from Italy, Spain, Turkey, China and international traders at low prices, and, lastly, a local producer has reduced its price levels to €770-780/mt ex-works, excluding VAT.

Rebar price levels in the Turkish domestic market have also registered a decline this week, just as in the other European markets. The fact that the Turkish rebar producers did not conclude a lot of deals to the domestic market in the mid-July to mid-August period - on the contrary they have been concluding deals to Dubai at good price levels and for big tonnages since early 2008 - can be pointed to as the main reason behind this decline.

The Turkish producers' offers at $1,550/mt CFR for October shipments are not being met with acceptance. This is because international traders have been offering rebars bought from Turkish mills in recent months at $1,350-1,400/mt CFR Dubai to the traders operating in this local market. However, it is heard that some Turkish producers have offered rebars with CARES certification to Dubai traders at $1,200/mt CFR for October shipments.

As regards the local Turkish rebar market, price levels are at TRY 1,370-1,420/mt ex-works/ex-warehouse including VAT ($980-1,016/mt, excluding VAT). It seems inevitable that the rebar prices in this market, which have registered a decline of around $100/mt compared to last week, will continue to soften unless end-user demand increases or rebar export deals or export prices improve. Meanwhile, the Turkish producers are offering rebars to destinations other than Dubai at $1,080-1,150/mt FOB Turkey.

In the local Dubai rebar market, almost all traders' stock levels are at high levels. For this reason, it is heard that they are considering slowing down their purchases. Traders are warning that local prices may soften due to the fact that there have been a lot of rebar offers at various price levels and also due to the high stock levels. They agree that the market should avoid purchasing low-priced material in order to survive.

In general, producers and traders in the European and the Middle East markets anticipate that finished steel prices will increase, and raw material prices also, when September begins and market players start making deals for October shipments. Here are the reasons behind this expectation:

- It is expected that the construction sector will slow down due to Ramadan (ends in late September). With the conclusion of Ramadan, it is thought that construction works will gain momentum in the Middle East and that rebar demand will possibly grow.

-  If the stock levels of international traders, who have previously taken position and have concluded deals to Dubai, register a decline; then traders from Dubai may start to purchase finished steel from the Turkish producers.

- Due to the rebar demand from Dubai and possible new deals, the producers in Turkey (the biggest scrap importing country in the world) may conclude a lot scrap deals from Europe and the USA. As a result, raw material prices may increase and, consequently, the finished steel product prices in the European and Turkish domestic markets may go up.

- The local traders in Europe and Turkey, whose stocks are at low levels now, may consider increasing their stock levels against the background of rising prices and, thus, prices may increase further due to the consistent levels of purchases.

In the upcoming weeks it will become clearer how many of the abovementioned scenarios in the producer-trader-end user triangle come true.

€1 = US$1.472


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