Global longs market under very strong pressure from Chinese exports, Trump 2.0 brings uncertainty and volatility

The global long steel products market is currently under very strong pressure mainly because of Chinese exports, which have been increasing and not showing any signs of slowing down. We have already seen what Trump 2.0 means – uncertainty, volatility and a lack of visibility. It seems like the situation will get even worse until the dust settles and his goals are clearly understood. So far, Trump’s announcements have given rise to concerns about inflation, which will slow down interest rate cuts.

US long steel and construction segments waiting for the dust to settle

The market in the US has entered a waiting period in terms of the outcome of some of the decisions already made by the White House and others under consideration and delayed for further negotiations. New infrastructure projects are on hold, amid the government freeze on spending. Interest rates have not come down and there is no clear sign for the near future, thus delaying many projects and also purchases by would-be home buyers. Labor shortages in the construction sector are becoming a near certainty, causing delays and higher costs for construction developments. Domestic rebar producers are reluctant to increase prices for another 30 days, until there is certainty regarding the duties on Mexico. They are generally competing with each other rather than with imports, which are very light.

All eyes still on China

On the other hand, the real determining factor for rest of the world other than the US is China, simply because the US is now a separate world for the global steel market.  We all need to wait and see what China’s policy in the current year will be: will they continue with steel exports of over 100 million mt or will they slow down to help the global market to stabilize?

EU mills locked in cycle of low demand and high costs

The EU steel market is suffering from continuing low demand for long products, with European mills locked in a cycle of poor demand and high costs. The construction market in most EU countries is still very slow due to seasonal reasons but also in general due to much less demand from investors. In this context, the merger of Badische and Van Merksteijn will certainly have an impact in terms of consolidation. Meanwhile, energy prices in Europe are once again at levels not seen since 2022. The cold winter and the shortage of base load in Germany have pushed electricity and gas prices to their highest levels of the last three years, at least until the end of spring. These higher costs will force long steel producers in the EU to increase prices and to shut down more capacities in 2025. Feralpi seemed to have stopped production completely in January, while Riva Germany officially announced shutdowns to run from January 1 to March 30.

EU’s long steel import quotas quickly exhausted at start of year

The EU’s import quota for “all other countries” was exhausted on day two or three at the start of the year, with the huge volumes which were imported by Bulgaria and Romania. This means there will not be more imports from “all other countries”. Turkey and Algeria are mostly not competitive enough to attract EU importers. The price increases announced by German and Italian mills have not yet been accepted by the market but they probably will be as soon as benders have to restock, especially given the current euro/US dollar exchange rate. The very strong US dollar is another factor keeping prices low in the international market.

Protectionism is the new magic word, consumers to lose out

Protectionism seems to be the new magic word for economies worldwide. The markets are running into a spiral of protectionism in which everybody will lose out, especially the middle-class consumers and industries.

Longs mills forced to cut outputs, low profits make environmental targets unattainable

Mills in the long steel products market are forced to lower their capacity utilization rates, which will negatively affect their cost of production. There is a chain reaction of displaced export capacities due to Chinese exports. The steel industry is also suffering from a lack of profits, that makes it impossible to achieve net zero commitments.

Current market very difficult to operate in, outlook very unpredictable and unstable

Under these circumstances, the current status of the market can be described as unstable and very difficult to operate in. The outlook for the next quarter is very unpredictable and unstable.

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