The global long steel products market has been off balance recently, and the general situation has gotten marginally worse, according to the short-range outlook report issued by IREPAS, the global association of producers and exporters of long steel products. One of the leading indicators of the worsening in the market is that the current Turkish spread between import scrap and rebar prices is now the lowest value observed since August 2017. The number shows a downward movement of $55/mt from the peak observed in August this year. All in all, global consumption and demand remain strong. Despite the tariff war, the global long steel industry is in a better situation now - with the exception of Turkey and the MENA region - since the first half of 2008. Ferrous scrap prices are strong and other raw material prices are holding their ground, thus making steel prices stable as well.
Billet and slab prices currently driven by oversupply
Billet and slab prices are currently driven by oversupply, while ferrous scrap remains available and at higher cost levels. Hence, there is a certain rebalancing in the market.
Imports to Canada are unlikely after latest safeguard decision, demand in US is satisfactory
IREPAS said that it is very difficult to envision anybody intending to import steel into Canada following the latest safeguard decision. There is no doubt that prices should be firming up in the Canadian market as a consequence. Meanwhile, demand in the US market is the same and satisfactory, while supply is also catching up. Lead times are getting shorter. However, due to the year-end, less material is being purchased for stocks. The market is waiting to see whether the extra 25 percent tariff on Turkish steel will be removed or not.
China’s winter steel output reduction a positive for the global market
The winter heating season in China is running from November through March and will withdraw exportable tonnages of steel. The Chinese steel output reduction over the winter season is certainly a positive for the global market, though no price changes have been observed because of that yet. Chinese producers are out of the international market and long product exports from China are very low, and in the coming weeks this is not going to change. Ocean freight rates have moved upwards, increasing CFR prices but not allowing any increases on FOB basis, the IREPAS report pointed out.
Prices in EU expected to firm up towards end of safeguard measure period
The EU mills are earning good money despite imports from Turkey. Prices in the EU market are also expected to be firming up towards the end of the term. The quota for rebars is going down gradually and it looks like imports could become risky by early January, according to IREPAS. That said, there are some expectations that the EU may extend the current import quota system in November to last beyond the current period which ends in February 2019. On the other hand, the weakening of the euro and low water levels on all EU rivers make imports to the EU more difficult now. Low water levels of the Rhine river have also hampered logistics in the waterways to export terminals, and this has withheld some scrap exports.
Turkish mills suffer domestically, though EU remains a solid market for their exports
Lately, the EU has been a solid market for Turkish mills to replace the quantity previously shipped to the US. However, the IREPAS report underlined that Turkish mills still suffer from very bad domestic market conditions. Under such market dynamics, it is pretty difficult for Turkish mills to pay the current prices for scrap.
Regional differences in market conditions
As trade keeps getting more and more regional nowadays, the market conditions show differences depending on the region. IREPAS stated that, although the market situation can be described as fluctuating and unstable in general due to trade interruptions and imbalances, stability is observed in the US domestic market, and also for steelmaking raw materials.
Outlook remains satisfactory for next quarter
According to IREPAS, despite the fact that political decisions can impact international flows in a way that it is impossible to foresee as all can change with one tweet, the outlook for the next quarter is still satisfactory.