Global longs market overwhelmed by spiral of trade measures, everybody afraid to do business amid current unpredictability

The global long steel products market is currently overwhelmed by a spiral of duties and trade measures – protectionism such as has never been experienced before. The scenario for global the long steel trade is being re-written now by governments. Tariff barriers are being erected all over the world.

No one seems to know where we are heading

Because of the uncertainties created by the US administration on top of the already existing problems, the markets are now somewhat lost. As a result, pressure is very high. Unpredictable decisions by the US government can change the plans of market players overnight. It seems the US finally discovered the best method of protection by creating uncertainties and making it hard to export to the USA.

Some good news from China but it may continue to export

The news released after the national congress in China is promising. However, we still need to see if the production reductions will become a reality. It would have been great if the Chinese government reduced production as they did in 2015-16, but, since the economic situation in China is getting more and more difficult, exports are becoming increasingly important for them. They may simply not be in a position to enforce the production reductions on local governments and individual steel mills. Domestic prices in China are not encouraging and are still making exports more attractive.

Mills in EU unhappy with revised safeguard measures

Mills in the EU feel the region is lagging far behind the fast-changing landscape of international trade and that in the proposal for the revision of the EU safeguard measurers the European Commission has not proposed any defence measures against surging imports, thereby leaving the EU wide open for more imports and thus more trade measures from the US. On the other hand, importers feel lobbyists have finally found the best playground to get their ideas through, focusing on the destiny of downstream industries and consumers, while inefficient steel producers in the view of the importers continue to be subsidized. The new safeguard measures in the EU will surely force some of the countries exporting to the region to slow down.

Current unpredictability also hits steel business in US

The general steel business in the US has worsened. The current demand in the market is actually opportunistic buying in anticipation of higher duties in the future. There was already a surplus of material imported last month for the same reason. As for reinforcing bars, there is slower demand with less construction due to the market uncertainty and continued high interest rates. There is also higher competition between domestic producers in the US as there is more reinforcing bar produced than consumed at present, making it difficult for imports to compete. A flat 25 percent import tariff in the US will benefit low-cost countries. In long products the price increases in the US are lagging behind flat product price rises.

Scrap prices continue to rise, semis become a more attractive option

The markets have seen an almost $30/mt price increase for scrap during the last five to six weeks. The increases in scrap prices force EAF based mills to replace their scrap purchases with the procurement of semis. EAF-based mills are already priced out and the smart choice is semi-finished imports from Asia as evidenced by recent Turkish import statistics. It is a battle of costs right now and nothing else matters.

Market situation is unstable and highly volatile with a similar outlook

Overall, the current environment is not bright, to say the least. The level of competition in the global market is very strong, being almost at maximum levels.  The current situation in the market can be described as unstable with high volatility, with a similar outlook.

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