According to the short-range outlook report issued by IREPAS, the global association of producers and exporters of long steel products, while the supply and demand balance in the global long steel products market still looks good, the supply side is gearing up. Supply pressure is not expected to create big problems in the short run but may be an issue in the medium term if demand is not able to cope with it. Even Chinese companies have learned that dollars are more important than tonnages. Accordingly, everybody needs to be careful when thinking about adding more tonnes.
Strong rebar demand in major consumption areas
As regards the short term, the situation has worsened due to the declines in Chinese steel prices and in scrap prices. However, the prospects in the medium term are brilliant because demand for rebar is strong in the major consumption areas. The limited supply of Chinese steel is the biggest positive in the global market. Hopefully, after the Chinese New Year holiday, the market will move again and scrap prices will rebound, pulling rebar prices up once more, IREPAS predicts.
Wait for Section 232 outcome causes some uncertainty in US market
Demand has been steady in the US with the potential to improve in future months; however, supply in the US is limited. The unknown fate of Section 232 is holding back imports, giving domestic mills the opportunity to increase their prices. This situation may change quickly depending on the results of Section 232.
Scrap demand to remain at decent levels in EU and US
The long-awaited correction in ferrous scrap was seen in January despite demand being fairly stable. Decent demand in the steel sector will continue to keep scrap demand at decent levels for the coming month in the European and US markets, since the influx of imports is at subdued levels. On the other hand, as electric arc furnaces will face challenging prices for electrodes both for spot trades and longer-term contracts, the cost difference between blast furnaces and electric arc furnaces will bring scrap prices to reasonable levels.
Depreciation of dollar, oil prices above $65 and unchanged US Fed rates provide support
The weakening of the US dollar, which has depreciated by almost another four percent against the euro compared to one month ago - which means that prices in the EU have appreciated almost by $25/mt just because of exchange rate - continues to ensure high commodity prices. Oil prices are above $65 a barrel and the US Federal Reserve has kept interest rates at unchanged levels. These are all positive factors supporting the current atmosphere. The IREPAS report pointed out that the weaker US dollar coupled with the increased balancing of world trade will likely mean that prices for steel and scrap will maintain somewhat elevated levels as compared with recent years.
Competition is mostly at reasonable levels
Competition in the market is mostly at reasonable levels. However, mills’ margins are sufficient for them to be able to reduce prices to become more competitive if they have to.
Outlook for next quarter is satisfactory
According to the IREPAS report, the market can be described as mostly stable and looks set to continue like this, with some exceptions. The outlook for the next quarter is satisfactory.