Global long steel products market still in critical situation despite greater price stability

The global long steel products market is still in a critical situation as market activity has been pretty slow for a long time. Demand in the market has softened but supply remains the same. Buyers have been receiving offer alternatives but they are not in a hurry to buy. As such, sizable purchases have not been observed over the past two months. Under these circumstances, suppliers are trying to keep prices stable. Low inventories and supply constraints in China are helping to sustain international prices. High raw material prices are also helping finished product quotations to remain firm. As we are around the logical bottom level of prices, the downward movement of prices has stopped. This has removed the anticipation among buyers for a better price with each new day.

Export-dependent mills struggle to find new markets

With all the geopolitical developments happening globally in addition to the increase in protective measures, export-dependent mills are finding it very difficult to compete and to find new markets or to develop their business in existing markets. On the other hand, buyers are searching for new alternative sources as in the case of US importers buying from Asia and Peru.

Gap between EU and third country prices narrows

In the meantime, the gap between third country and EU price levels has narrowed. Turkish prices have moved up, while EU prices have weakened as there is very little activity due to the summer lull.

Firm prices in ferrous scrap market on back of stable demand

Ferrous scrap pricing firmed during the month of July in line with stable demand. Pricing bottomed at a higher level this time around in the benchmark Turkish trade as compared to April this year. Scrap was a more favorable alternative as iron ore pricing firmed and held semi-finished steel at a premium. Risk premiums and financing costs were raised immediately after the failed coup in Turkey but trade was restored quickly.

Extra caution among market players: some good news from China

Everybody in the market is extra cautious on both sides, which holds the market from falling apart. Trade remedies are narrowing the Chinese playground which eventually will force them to slow down their dumping into markets. China has recently announced it has set aside more funds to tackle zombie steel capacity during 2016. Additional antidumping duties towards Chinese exports and capacity cuts have also contributed to improving the market prospects.

Competition still very strong and output remains the most critical market driver

The current market situation is unstable and competition is still very strong. Even though prices are managing to remain stable in some regions, output levels remain the most critical driver since demand fundamentals have not improved considerably. If Western countries continue to produce more compared to same period last year and if the decrease in China’s production rate remains way below the decrease in their domestic consumption, there is a strong possibility that the market to go back to square one. As such, the outlook is also unstable.

Onus now on China producers to reduce output

It becomes clearer that the world can handle 50 million metric tons of steel products exported by China per year. Therefore, if China cuts about 50-60 million metric tons of production which is more or less 6-7 percent of its total output, then the global market will be able to reach a stable state. The onus is now on the Chinese producers to reduce output as almost all others have already done.

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