IREPAS: Supply-demand balance better for longs, freight still a major issue

Wednesday, 08 September 2021 15:50:30 (GMT+3)   |   Istanbul

Steel supply and demand has gradually been balancing out in the global longs market, thus helping the market to get back to a relative normal in terms of prices, lead times, etc. However, the high freight rates are still weighing on businnes overall. Still, according to IREPAS, the global association for longs exporters and producers, the new normal in terms of prices may be different from where we started, with price ranges higher than the ones seen in the fourth quarter of 2020. In the meantime, the mills protected by Section 232 and the European safeguards are enjoying their positions, although these markets face supply which is shorter than their needs.

Specifically, in the EU the stocks of cut and benders are said to be higher than usual as many projects have been put on hold due to the high costs of products, including rebar. This puts additional pressure on the cut and benders’ profits, but there is hope that European demand for structural steel will improve after the holiday and ahead of the winter season. The outlook for the next quarter is satisfactory in the EU, as for the ferrous scrap market.

The supply sitution in the US seems better now being more balanced with the high demand levels. Some shortages are still seen on the West Coast and some shipping costraints are still weighing on supply. In this situation, a lot of market players prefer to deal on FOB basis both in the local and import segments. Also, credit has become an issue for importers and it is getting harder to insure receivables. Some downward adjustment may be seen in North American region in terms of pricing might during the remainder of this year and it could spread to other markets.

The longs markets in the Far East have been facing a slowdown with some adjustments being done. The Indian and Vietnamese producers are exporting, with margins being reportedly rather high in the region. The Russian producers, despite the export duty they face, continue selling as well, but are mainly active in the billet segment.

According to IREPAS, the current situation in the freight market is out of touch with reality, and is a major factor nowadays, which makes all sides careful in their trade. İt is getting harder to get FOB quotations, while offering on CFR basis is also difficult due to the constantly rising freight costs. This is expected to create a short-term downward pressure on prices and long-term shortages in importing countries. In addition, high freights lead to the regionalization oftrade. Insurance is also becoming an issue simply because the value of traded cargoes has reached very high levels.

China’s decisions certainly remain among those that need to be watched closely since its steel production restrictions for the current year at 2020 levels mean stronger demand for semi-finished imports, which should support sales from the ASEAN region and the CIS. In addition, this could also buoy up steel pricing.

Although the number of Covid cases worldwide has been an issue, most countries will be entering the cold weather season soon, but they should continue their reopening processes despite setbacks due to concerns over the Delta variant.

According to IREPAS, the demand prospects in the global longs market look promising due to the infrastructure investments planned globally. Stimulus money is still flowing and infrastructure spending in particular looks to continue for several years in the EU/ UK and North America.  Nevertheless, the future looks promising for infrastructure investors.

The competition situation in the market is also expected to get back to normal since demand has been gradually recovering to pre-pandemic levels. Turkey is still a strong competitor in its rebar sales to Asia. In the scrap market, there is regionalization, so competition is strong in general.

Overall, the current situation in the global long steel products market can be defined as stable and perfect to proceed, with some fluctuations here and there, IREPAS stated in its conclusion.

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