Although some improvement has been seen in the global steel market supported by positive news from China and trends in Europe and the US, the situation is still unstable and challenges remain, according to the short-range outlook issued by IREPAS, the global association of producers and exporters of long steel products.
One of the most positive signs is that China’s exports have continued to decline as the local economy is still being stimulated by the government and mills have the ambition to use domestic scrap supply in their steel production. By not being aggressive in exports, China is expected to continue supporting the steel industry globally, especially during its absence amid the Chinese New Year holiday.
Some support is seen in the EU where PMI figures have rebounded and where there is some cautious optimism on the manufacturing side. In addition, production rates declined in the EU and the US in the second half of 2019 as some necessary measures were taken in order to balance supply and demand. However, demand for rebar in the US specifically is expected to remain limited for now, exerting pressure on the recently increased domestic scrap prices, IREPAS foresees.
Downward corrections are also expected in Turkey’s scrap market as rebar demand is not supportive with Turkish mills’ order books being filled only for around four weeks from now. In addition, Turkey is seen to be shifting its scrap-buying focus to Europe and the US to a larger extent than previously. Overall, in the first quarter this year, demand for the raw material is expected to be solid.
The new IMO regulation may contribute to further regionalization of trade as longer-distance transportation costs will be hit. Another negative point is the Iran situation and the aggravation of tensions with the US. IREPAS suggests this issue should be watched closely as it may lead to some shifts in hydrocarbons and in the steel markets.
Overall, IREPAS views the outlook for the global long steel market in the short run as satisfactory as previous fears of a possible recession seem to have been exaggerated somewhat. However, competition in the global longs market may toughen due to the regionalization of trade and protectionism.