Stagnation prevails in unpredictable long steel market

Some customers in certain regions have returned to the long steel products market after a long absence. Nevertheless, for almost all products supply is still greater than demand, resulting in very difficult market conditions.

Competition is very strong in the marketplace, and can even be described as fierce in the North American and Asian markets. The oversupply situation in China has worsened dramatically, with rebar inventory in China reaching very high levels. The Asian markets are already under serious supply pressure from Chinese exports, and furthermore there is the risk of a potential introduction of incentives in China which could exacerbate this situation.

Import iron ore prices in China fell by as much as 10-15 percent during the second part of July, and there is still room for a further drop.

Despite all negative factors, traders and producers of long steel are still able to do business on a daily basis. Freight rates are workable and scrap prices are firming up as inventories are low. On the other hand, the demand is still very good in the Middle East and mainly in the Arabian Gulf, more specifically in Saudi Arabian and Qatar markets.

Overall, the current long steel products market can be described as stagnant and as allowing no margin for producers with the exception of Arabian Gulf.

The Outlook for August

Under current circumstances, the market is very unpredictable and may even result in negative margins in August.

In spite of such difficulties, some movement may be seen after the summer holidays and Ramadan, especially amid the increase in scrap prices. However, no huge movement should be expected due to the serious oversupply problem. Also on a positive note, the summer shutdowns implemented by some mills in the northern hemisphere will help reduce supply pressure in the market, though the impact of such cuts in capacity utilization rates may only be felt more towards the end of the year. Meanwhile, it remains to be seen how the drop in iron ore prices will affect the scrap market.