Political instability casts a shadow over long steel market

The global long steel products market has been adversely affected by political developments in Ukraine and Turkey, and also by the prevailing market conditions. The downward trend in raw material prices and the excess supply of finished products in the market have resulted in a slowdown in purchasing activity. Despite the continuing improvements in developed economies, these have not been reflected in stable prices for long steel products. Demand is stable only in the USA, but prices have started to come down following the large amounts of last-minute imports of reinforcing bars.

Demand for ferrous scrap rises

Demand for ferrous scrap has increased as prices declined during recent weeks. Steelmakers continue to produce at near record rates and so raw material consumption is also high. Demand for ferrous scrap appears to exceed supply in certain markets though significant concerns remain.

Competition in the scrap industry is very high on both the buying and sales sides. There are many examples of it costing less for steelmakers to purchase steel billets or slabs than to convert scrap.

Under these circumstances steel billet is expected to continue as an alternative to ferrous scrap for a number of mills, and a higher quantity of iron ore-based steel billets will be on the market than ever before this year. That said, the situation in the Black Sea region has to be monitored very closely as it may cause a drastic change in circumstances.

Iron ore prices and indeed coking coal prices are together at very low levels not seen for many years.  The increased interest in semi-finished products will eventually balance prices.

Intense competition in long steel market

There is also intense competition in the market for long steel products. CIS and Chinese origin offers are competing to be the best available price. The market overall is very much oversupplied, and the price trend has more or less stabilized at a low level. Prices in the EU market have not yet succeeded in moving up.

On the positive side, demand in developing economies is gaining momentum. Economic activity in the EU area is slowly improving and prices of commodities including energy and raw materials all over the world are on a declining trend which helps growth along.

Outlook for March

Improvements in demand for long steel products should be noticeable by the end of the winter season. Reductions in steel production might also help price improvements. There are some positive signs for near-term business volumes and pricing,  but the latter continues to be subject to scrap, iron ore and coking coal pricing as well as currency changes.

However, until the political situation in Ukraine and Turkey become stable, it will be very difficult to predict the future.

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