In a closed session this morning at the SteelOrbis 08 Spring Conference and 58th IREPAS Meeting, long product traders discussed the current situation in the markets and what should be expected in the coming two-to-three months.
2007 had been a good year with a high market performance and strong consumption levels. Since the beginning of the current year, however, we have been observing ever-rising costs of production and also soaring product prices.
The US recession is a major topic when attempting to predict the future of the market. There are expectations that the recession will be over in four-to-five months or, at latest, by the last quarter of the year. Not only the US but also global financial institutions are experiencing unprecedented financial pressure. Customers are suffering a constant lack of liquidity which may lead to some bankruptcies as manufacturers are squeezed between their purchase prices and the commitments they have to fulfill. Prices have doubled but, on the other hand, credit limits have been cut. In this context, it is advised that traders proceed with caution when performing sales.
It appears that the near-term future of the market very much depends on the demand coming from the major players. Countries that have strong oil revenues and cash inflows may be able to maintain their growing demand for steel, while the remaining markets are under pressure from restricted liquidity and economic slowdown.
The Middle East, and particularly the United Arab Emirates, currently constitutes the major source of rebar demand, and there are also some indications of revival in southern Europe, mainly in Spain and Italy. A growth in demand of 2 million mt is expected over the coming two years in Dubai; it is also reported that construction projects in Abu Dhabi are expected to increase soon. Turkey, which is an important supplier of rebars to the international market and as such is benefiting from the construction boom in the Middle East - is registering a certain lack of strength in domestic demand due to the slowdown in its own construction industry. Housing construction activities in Turkey are sluggish for the time being. However, with the coming of spring increased levels of activity may be seen in Turkey's domestic rebar market.
China, which has been away from the export markets following its implementation of export tax adjustments, may have the opportunity to return to the external markets given the new, elevated levels of global rebar prices these days.
In this overall market context, the majority of traders - in the views they expressed at the closed session - appeared to be of the opinion that the rebar markets would remain stable at the current high levels for the next two months. This was seen as the likely trend of the markets, unless there was a considerable revival in terms of demand outside of the Middle East, especially as the other major long product markets are experiencing weak levels of construction activity even though prices continue to climb up on a daily basis.