Demand is stable, prices are decent, and struggling end-use sectors seem to be on the rebound, yet the US long product market remains relatively stagnant. Speakers at SteelOrbis' annual Rebar & Wire Rod Conference in Las Vegas on February 4 tried to ascertain the reasoning behind the "air of uncertainty" still clouding the market, a conversation that spilled over into the cocktail reception among attendees from all levels of the long product supply chain.
Philip Hoffman, Vice President of US Ferrous Scrap Trading for Colakoglu Steel, investigated the scrap angle of the situation, looking primarily at China and its role in the scrap market. China's increasing use of EAF in its national steel production means a greater demand for scrap, and Hoffman said that it has become apparent in recent years that China "sets the floor" in global scrap pricing, due to the correlation between iron ore prices on Chinese scrap prices. With the international scrap price so tied to China's economy, any hiccup in their steel production ripples throughout the global market. However, the influence is not too substantial, as Turkey and South Korea currently import more scrap than China.
John Foster, President of Kurt Orban Partners and Chairman of the American Institute for International Steel (AIIS), continued the speaker panel by discussing the "mixed bag" of economic indicators from quarter to quarter that exacerbates the uncertainty in the steel market. While most buyers of steel are still proceeding with caution and only buying what they need, there is substantial pent-up demand in the market and significant cash just waiting to be spent. What are they waiting for? Foster claimed the unresolved "fiscal cliff" situation in the US government to be mostly to blame, proving his point by taking an impromptu vote among attendees on whether they think the US GDP growth this year will be more or less than 2 percent. Half the attendees voted more, half voted less.
Rounding out the panel was Jim Kerkvliet, VP of Commercial Sales for Gerdau Long Steel North America, who broke through the market uncertainty with a forecast of increased long product demand through 2017. This year alone, Kerkvliet expects apparent demand for rebar to increase 4.4 percent and 3 percent for wire rod. While the first half of the year will be weak under the influence of the fiscal cliff situation, things should look up in the second half, he said. He also echoed Foster's assertion of abundant cash in the market waiting to be spent, saying that banks, along with corporations, are sitting on trillions of dollars, and he expects that money to be spent soon considering that residential construction has bottomed out and is primed to improve. There is looming overcapacity in the global steel market, he said, just looking for opportunities. Hopefully, attendees paved the way to take advantage of such opportunities during the filled-to-capacity cocktail reception afterward.