IREPAS Terms Long Products Outlook as Unstable & Negative
Strategic Research Institute
Published on :
8 Nov, 2022, 4:01 am
The International Rebar Exporters and Producers Association in latest Short Range Outlook November 2022 said that demand is at crisis levels in global longs market and unlikely to improve in coming months. IREPAS said “Demand in the global long steel products market is either very low or there is no demand at all, depending on the region. Overall demand is less than real supply and possible supply increases. The demand for ferrous materials has also slowed down considerably as industrial outlooks have lost visibility. Energy cost uncertainty and the destruction of demand have led to order cancellations. Demand is not expected to improve in the coming months and therefore operating under current conditions is not sustainable for the steel industry. More closures will follow in the coming months especially for those who also suffer from the consequences of the war in Ukraine.”
IREPAS said “Customers are delaying purchase decisions while Chinese traders are shorting the market. Steel mills are in trouble and even those in Asia are entering the red zone. Energy prices have been softening thanks to the warm weather but may go through the roof again at any moment.”
On the demand side, IREPAS said that private sector construction activity in EU has almost completely dried up. IREPAS said “Private sector construction activity has almost dried up completely in the EU market, which places small and medium-size cut and benders in real difficulty. Industrial and public projects are still available in good volumes, but everyone is fighting for them now and undercutting prices to an extent we saw at the beginning of the pandemic when some market participants believed prices would fall through the floor.”
IREPAS also said “However, domestic mills in the EU are doing everything to maintain prices at a certain level and, even if they have reduced sales prices a lot in the last couple of weeks, their clear aim is profit before volume. The uncertain situation for mills in relation to gas and electricity bills remains unpredictable, which makes it difficult to push prices down. However, more pressure is coming from imports. Demand for construction, on the whole, is still good in Europe. At least in Germany, demand is still good despite the pressure on prices. Those who have full order books are in a good situation and can sit and wait if they have covered their needs.”
IREPAS added that US market outlook has become more unknown and negative, mills still see record profits. IREPAS said “In line with the general international market, the US market has also changed to a more unknown and negative outlook. With the expectation of raw material prices coming down, there is an expectation that all pricing will undergo a correction. With this expectation and the approach of the end of the year, most service centers are reluctant to replenish their inventories. The steady rise of interest rates also increases the expectation for a slowdown in the economy and in future construction, especially housing and commercial construction. Although all pre-financed projects are keeping demand high, the future is more uncertain, especially after the mid-term elections in early November. Unemployment is still very low, making it difficult to find qualified workers both at warehouses and ports. Ports are still very congested, making cargo movements even more difficult. Protectionism is on the rise even with this administration, with so many roadblocks at every step to discourage imports. In spite of all such negative developments, the US mills are still turning in record profits, even though the July-September quarter showed fewer earnings.”
IREPAS said “In general, market prices are under pressure from Far East and Southeast Asian mills that are being very aggressive. The GCC countries are also offering very low prices which make it impossible for Turkish producers to compete in the long products market. Even the Turkish market has become a battlefield for some exporting countries like Russia, India and China for some other products. The coming holiday season will probably make things worse. Turkey has been squeezed between low-priced semi-finished steel products and a stronger India than normal. In China, iron ore prices have fallen to two-year lows amid renewed fears of more COVID lock-downs. Freight rates are becoming more predictable, which may be considered as more good news for the market. Logistic costs are slowly moving towards normal but are still at high levels. At least the availability of vessels, barges and trucks is better now.”
IREPAS pointed out that lower ferrous scrap flows have mitigated demand cuts to some extent and India has also had a strong appetite for raw materials for some time and this is expected to also continue well into 2023.
IREPAS concluded that current market situation and next quarter outlook are both unstable and negative. IREPAS said “Under such circumstances, the current situation in the global long products market may be described as unstable, while more negative news continues to come from Russia’s war in Ukraine. The outlook for the next quarter is also unstable and negative. The January-March period may be worse than the height of the pandemic, driven by lower prices in Asia and continuing impacts from the ongoing war in Ukraine.”