The global demand for long products seems to have been picking up lately in most regions, mainly due to seasonal reasons and the post-holiday season. However, aside from most markets, in the EU the situation has remained weaker in terms of local trade. Globally, supply has started to be adjusted accordingly, which has led to a hike in prices and resulted in a certain change in market dynamics.
The position of Turkish mills on exports has remained sustainable in terms of the limited number of destinations available for export trade. There are few buying markets where Turkey can be competitive, although the softening energy prices has been helping to provide better margins. However, the competition withlongssuppliers from North Africa, the GCC and Asia remains rather tight. At the same time, Turkey’s willingness to aggressively selllongsfor export diminished in February, due to the change in moods in the domestic market following the devastating earthquakes in southeastern Turkey. The government’s plan to rebuild the affected area created an expectation of better demand in the domestic market, though the details of the construction works are still not clear. The government is foreseen to focus on reconstructing new housing units for those in need of shelter, and so the major construction works may be on hold for a while. Moreover, talks between the government and the mills are continuing, and the control of prices together with preservation of mills’ profitability are under discussion.
The post-earthquake expectations and the temporary suspension of operations of certain Turkish mills have led to increased demand for scrap in the country, which in its turn triggered a price increase. There is an expectation Turkey will increase its rebar production rates once demand in the Iskenderun region starts rolling, which would require larger amounts of scrap. In addition, the government announced the increase of import duty rates for flats in order to stimulate domestic production, but the imposition of the measure was postponed in the aftermath of the earthquakes. As a result, due to the increased demand in Turkey, the workable prices are now almost equal to those seen in Asia, while normally the difference is quite significant.
In the EU, mills’ margins are seen to be squeezed while prices forlongswere falling in February due to very little activity. Despite the favorable weather, construction segment has not been seeing a better demand, while stocks in the secondary market are quite full. In the meantime, raw material prices strengthened, putting mills in a more difficult situation. Another issue is the inflow of import offers, specifically for origins outside the EU quotas, which also undermines the price sustainability for EU mills.
US long mills still seem to have been keeping their production below the levels of the previous couple of years and it looks like they have control over prices, resulting in rather healthy profit margins. The demand for long products in the US remains flat, although there is an expectation for a certain slowdown in both residential and commercial construction activities. Interest rates are at their highest now and are expected to increase soon. In addition, one of the challenges is increasing global scrap prices, which could “eat” part of the margins resulting from earlier price rises in thelongs段。
China remains a source of hope for many in the steel market since Covid-19 restrictions were lifted and the country’s economy has been slowly restarting. In addition, the Chinese government is releasing some positive messages about growth, adding to the optimism in the market.
In the meantime, Russia remains a toxic origin for many in the global markets and risks of getting in trouble with secondary sanctions and banking issues have been rising. In fact, the US authorities have imposed 70 percent import tariffs on Russian iron and steel, which also sends an additional signal to the other market players globally. In particular, it can be assumed that the US is now leaning on Brussels to do the same.
Logistics in the global steel market are becoming somewhat easier and sea freights have been going down, while bottlenecks have started to vanish in certain areas. The reasons are mainly seasonally-related and overall the improved situation provides some room for new positioning and more options in the market.
Competition in the markets which are not completely protected from imports is estimated to be medium to strong, though it is still quite fragmented. Still, the global trade and the markets remain more regional.
Overall, the IREPAS outlook for the globallongsmarket varies depending on the region and country. While the situation is set to remain relatively satisfactory for the US and Turkey, in the EU the market is expected to remain a bit shaky. On the other hand, the expectation for the ferrous scrap market is quite positive.