While the global steel market is generally in the pre-holiday period, some rise in demand has been observed, supported mainly by the unexpected rises in raw material prices and by energy price hikes. Buyers have mainly accepted the price rises on the steel side, at least gradually, seeing no other alternative. However, it is not yet clear whether the demand and buying activity will continue. Competition in the global steel market remains quite high and is still more regionalized.
In particular, in the raw materials segment, scrap prices exceeding $400/mt CFR Turkey and rising even further has been rather unexpected, given the relatively unfavorable market for longs. The uptrend was due, on the one side, to Turkish mills’ need to restock for January, while the supply of scrap in the market was limited. In addition, the situation in the billet market, where there had been a shortage of suitable allocation, has also increased Turkey’s demand for scrap. As a result, since the uptrend is not driven by a better finished steel market situation, there are doubts regarding its sustainability.
China remains an active exporter and its rather large export allocation still puts a ceiling on how high prices in many other markets can go. In fact, the lack of a further increase in China’s export volumes is considered a positive sign now, but supply is still plentiful. Recently, the Chinese government announced a large stimulus package which will support domestic demand and also limit any increase in steel exports from the country.
The US market is expected to reach 90 million net tons crude steel production in 2023, slightly less than in 2022. The steel market is generally steady but housing and commercial construction is still down due to high interest rates. Prices are going up but the trend may not be sustainable due to adverse winter conditions and the upcoming holidays. In the meantime, while downstream margins are quite high in the US, they are close to non-existent in the EU. Some European benders have started closing down in order to reduce capacity, given the generally negative outlook.
Prices in Europe have mainly stopped falling and there are some attempts to increase the workable levels for longs amid slightly better buying and the upcoming holiday. In the import segment, there has been some interest in ex-Asia wire rod, while Turkey may also have a chance to fill the gaps if there is demand for cargoes with short lead times. In the meantime, reduction of CO2 emissions is still a widely discussed issue in the European region.
The general IREPAS outlook for the next quarter is unpromising and mainly challenging for most of the regions, except the US.