Global demand for long products has been extremely low recently, while the competition among suppliers has been high, though depending on the region. Mostly, the demand volume is lower than the available supply and even the prospects of a demand revival are quite gloomy. Lower finished steel sales have been pushing down the demand for raw materials, as industrial outlooks have lost visibility. In a situation when mills are under additional pressure from high energy costs, some of them have chosen to decrease their capacity utilization rates or have even temporarily closed the production. Moreover, additional stoppages are anticipated since demand is not foreseen to improve in the coming months and the market conditions will remain severe, especially for those suffering the consequences of the war in Ukraine.
In the EU, the situation with energy tariffs has temporarily eased due to favourable weather conditions, although they may go through the roof again at any moment. Another reason for the low demand and falling longs prices in the EU is the negative situation in the private construction sector where activity has almost dried up. The large industrial and public projects are still active, but competition in supplying to the segment has toughened. In this situation, EU-based mills have decreased production, but have also been forced to cut prices significantly. Additional pressure has been coming from the import side, particularly in the wire rod market where Algeria, the UAE and some Asian sellers have been active.
In the US, the situation for mills is still good in terms of profits, although there is an expectation of lower raw material prices and, consequently, discounts for steel are anticipated. In terms of demand, the steady interest rate rises may have a positive effect on construction, especially the housing and the commercial segments. While business activity, pricing, mills’ profitability and unemployment rates remain positive in the US, there are a lot of roadblocks at every step to discourage imports.
In recent weeks, more business activities have been delayed due to Chinese traders shorting the market, which has been putting pressure on the price situation. In general, prices in Asia are lower than the global levels in many regions, which has been putting more pressure on different markets. In addition, the GCC-based suppliers have been able to offer rather aggressive prices, which are not possible for the Turkish mills due to their high costs. China has become more aggressive lately in several segments, including the billet segment. Moreover, semis and longs offers from the GCC have gradually been becoming more attractive for buyers outside of the region.
Competition in the global longs steel market for regular buyers remains very high, except for markets protected from aggressive imports such as the US and the EU. Particularly, the markets in the Middle East and Asia are the most attractive nowadays, although for now trade is more or less concentrated inside the regions, being limited by high international freight rates, which have still remained rather high with not much chance of decreasing, but at least the developments in the freight rates market have become more predictable in terms of availability of vessels at least.
Under such circumstances, the current market situation and the business outlook for the coming months can be described as unstable, while more negative effects continue appearing from Russia’s war in Ukraine. The outlook for the next quarter is also unstable and negative, while the January-March period may be worse than the peak of pandemic in terms of the longs steel business, if low prices in Asia and the negative impacts of the war in Ukraine are taken into account.