The global environment for the steel business has started to improve with the long awaited rebound in scrap pricing and also supported by China remaining an active buyer and not being an aggressive exporter at the same time. However, the positive sentiment is foreseen to be short-lived as challenges still exist with the limited demand for steel globally being a key one, according to the short-range outlook issued by IREPAS, the global association of producers and exporters of long steel products.
Recovery in scrap and finished steel prices supported by China
Steel scrap prices showed a sizeable increase after the previous sharp drop as buyers needed to restock while the scrap inventory has been limited. This resulted in higher longs and flats prices from Turkey and the CIS specifically, while longs prices in the EU should follow the raw material uptrend, supported also by the lack of competitive imports, IREPAS expects.
The situation in China, which remains an active buyer for semis, raw materials and some finished steel products, generally supports the global market. On one hand, China has temporarily become an additional outlet for big sales volumes, on the other hand the country refrains from aggressive pricing on exports. IREPAS expects the situation in China to be relatively positive at least until the Chinese New Year holidays.
Some challenges remain
However, some concerns persist in the global market. IREPAS underlines, that the level of competition in the global markets remains high because of the lack of the demand in main markets and due to trade being restricted by protective measures. Steel suppliers from India, Russia, Brazil and Southeast Asia have been competing for every dollar in China. In addition, the regionalization of the trade continues with short lead times preferred and buyers not being willing to hold unnecessary inventories. Some troubles are expected in the supply chain due to the IMO 2020 regulation, which is foreseen to make the long-distance shipments more expensive.
In the EU, despite a certain rebound of industrial activity in Germany and surrounding areas, the general market expectations remain unclear, specifically due to the lack of clarity around Brexit. Some worrying signals are coming from Brazil, where steel production and exports contracted by 7.3 percent and three percent in the first nine months, respectively. In addition, the price support for exports to the US, for slabs in particular, is weaker than before, IREPAS reports.
As a result, the market outlook remains challenging and the fairly decent rebound in prices seen within the past couple of weeks might not last long as the demand situation remains generally unsupportive.