The market may improve in volumes

Eventhough there were many announcements by several mills indicating production/supply cuts during the last few months, apparently they were not enough to improve the supply and demand balance in the market, as the market situation kept worsening due to supply pressure.

Most buyers started to have lower price expectations, but later positive news coming from China has been of help for better sentiment in the market while production growth has also been slowing down globally.

The demand for raw materials has been healthy lately as steel mills were trying to build inventory before the start of winter in the Northern hemisphere and related potential price increases. The increases in ferrous scrap and iron ore prices have also helped to improve the market sentiment in the long products market. The demand in the market has picked up recently due to customer expectations that long products prices may increase as well. Consequently the supply pressure has been eased up to a certain extent as many mills have quickly filled their order books and others are holding back waiting for higher prices.

The market in general should have reached the bottom of the most recent downward trend. Iron ore prices have moved back up to $120/ton level, and the Chinese finished product market has been showing stabilized prices recently.  The demand in the international billets market has also been showing signs of improvement while the scrap prices were moving up due to increased demand for scrap. In addition, the Hurricane Sandy has had a negative impact on scrap collection and shipments from the US East Coast, putting more pressure on the market.

The level of competition is still very high in the marketplace as many producers need to sell. The demand in the market can still be considered as low despite the recent trend and therefore the long products market situation can be described as unstable and fluctuating eventhough there is some improving sentiment. On the other hand there is satisfactory demand for scrap in the market.

Outlook for November:

The market is expected to move in line with the seasonal expectations but may improve in volumes as it is starting to show signs of recovery. The prices for immediate deliveries may be considered as low but contract prices for future deliveries should be at higher levels.

The European market is still weak but increased activity is expected in coming weeks. Many companies would go through the end of the year with low inventories and replenishment purchases to arrive by beginning of 2013 are considered in certain markets.

Certain upward movement in China and some improvement in the US market are also expected.

The weather conditions will play a huge role in the scrap market. A severe winter season would slow down scrap collection and may result in supply shortage.

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