Poor visibility because of misty market in the longs markets

Wire rod and rebar prices indicated a stronger than expected decline in CIS and Middle East during July. Steep declines in prices of rebar, wire rod and billet ex-Far East put pressure on Middle Eastern and Gulf markets. Those steep declines are among the reasons that mills in Russia, Ukraine and Turkey, which are the major long product producers of Mediterranean, had to bring down their prices. Turkish origin rebars ranged in $505-515/mt FOB this week, but the export activity was low. Offers for UAE are at $530/mt CFR. Although the customers are in need of long products, they prefer to wait in an expectation to find lower prices next week. There is almost no activity in the Israeli market due to the political conflicts. Mesh quality wire rods offers ex-Turkey were at $495-500/mt FOB. However, weak export market in US and increased supply in the Southern Europe due to the Chinese origin wire rods prevented upturn in the European wire rod market on the contrary to rebar market. This situation created pressure on Turkish origin wire rods. Holiday period started to show its effect in Southern Europe, especially in the Italian market. On the contrary to other regions, rebar markets in Spain, Portugal and Italy indicated a strong outlook in July. Especially Spanish domestic market recorded improvements during July. In the European internal trade side, Italian mills were able to make rebar exports to this region, by taking advantage of high prices in Spain. Although the Portuguese market was strong in early July, the similar situation was not experienced here. Due to the holiday period, Southern European markets seem to have a flat movement in August compared to previous months. CIS domestic market is still strong, so the mills would focus on the domestic market rather than the export market. The interesting question is how long the strong demand in domestic market could meet the supply increase. Export prices indicate a decline every week. Wire rod offers from Ukraine are at around $460-470/mt FOB, while rebar offers are close to $450/mt FOB Black Sea. Speed of decline in CIS and Middle Eastern markets at the beginning of July appear to slow down. Customers, who are not making their traditional purchases, prefer to wait due to the influence of decline in markets instead. However, we have to take into account that 2006 may not be similar in character to last year. The Mediterranean market players this time have not built huge inventories like they did back in 2004 as if the prices would never fall. In general, trading firms and stockists concluded controlled purchases. Thus, there might be a rally in late August and September due to the pressure reduction of Far East on Mediterranean and Gulf, and European mills will recommence purchases after the holiday. However, this situation's realization of course is in close connection with the US situation in the fourth quarter and the movements of Far Eastern markets in August and September.