IREPAS: Global long products market in a “dramatic situation”

Friday, 09 September 2022 21:47:36 (GMT+3)   |   Istanbul

As global long steel products face a rising-cost business cycle, the market is now in a dramatic situation marked by longer-lasting inventories and lower demand than expected. Uncertainty lies ahead in the coming months, although Europe and the rest of the world appear to be following very different trends.

According to the latest report issued by IREPAS, the global association for longs exporters and producers, steel producers and consumers in Europe are currently facing an unprecedented increase in energy prices, and logistics crises in the EU are worse than ever, with cargoes stuck in place due to dry rivers and a lack of truck drivers. And while most in the global steel market expected a “post-holiday price increase” in Europe as usual in line with demand, prices are still increasing but this time due to geopolitical reasons as demand still remains low and production cuts are likely on the way. The cuts will balance low demand with higher costs, leading to significant price increases by EU mills.

In the US, demand and supply have followed a typical summer slow season but competition from imports has decreased due to serious congestion problems at almost all US ports, where it can take months to deliver discharged cargoes. Labor shortages, from truck drivers to office managers, has made logistics problems worse.

Turkey is also facing increased energy prices, with the cost of manufacturing steel spiking by $40/mt—this means Turkish mills will have to absorb the higher costs for all orders booked for September shipment. Turkish mills are also dealing with competition from Russia, where steel prices are on average $100/mt less regardless of the product.

On a positive note, raw material prices have finally stabilized, although it is expected to be temporary. There are still margins in some areas and long product prices are higher than prices of flat products in some markets, which proves that either supply is restricted or demand is good.

In general, however, prices are not expected to increase until supply meets demand, which may happen towards the end of the year. European steel producers continue to announce closures, which will raise prices and make importing look attractive, although it remains to be seen whether importing will be worth the risk with larger closures of other economic activities looming as winter approaches.

Still, European mills are able to import slab and billet made in countries that are not as affected by the energy crisis in Europe, and the only question is whether these imports will be allowed in without quotas. Even so, it seems certain that Russian exports will disturb prices and harm many producers around the world, especially Turkish mills. Producers worldwide are suffering from limited market access and high levels of competition, especially from Russia, which is extremely flexible with pricing as Russian producers search for any possible new markets.

Considering the mentioned circumstances, the global longs market can be described as unstable and fluctuating, but even as the situation looks bleak in Europe, measures that the EU has just announced will hopefully curtail the crisis. For the rest of the world, uncertainty abounds going into the fourth quarter.

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