The first quarter of 2023 will remain challenging for the global long steel industry as many mills will continue facing cost pressure while demand is not foreseen to recover much. In the last month of this year, trade has been reduced and net margins have narrowed in some cases, which also suggests that early 2023 could be quite difficult for the longs market if not the worst quarter in a long time, according to IREPAS.
Production adjustments are to remain in mills’ focus as, while demand is insufficient, they will aim to run their operations at reduced outputs and with minimal losses. In addition, if mills maintain production levels and sell at a loss, they may face additional trade measures. As a result, it may take time for the market to become balanced in terms of supply-demand. Governments’ softer approach to interest rates and central banks’ easing off on the issue may have a positive effect on the demand for steel and other commodities.
In the EU, buyers are uncertain regarding the post-holiday rebound. On one side, the mills are set to make longer revamps, which may limit supply. In addition, if the weather remains mild, construction will boost the demand for steel. On the other hand, the energy situation remains uncertain and it places a question mark on everything in the EU. In the US, the new Buy America investment package will come in force from the beginning of 2023 and, while it is good for the US internal business, some trade tensions may once again be triggered with the EU. A milder stance by China on Covid policies may be seen after the Chinese New Year holiday which may lead to an increase in the demand for all steel products and, subsequently, will ease the market situation in Asia and will mean less aggressive ex-Asia steel offers globally.
As a result, the IREPAS outlook for the first quarter of the year is highly unstable and unpredictable.