The steel sector expects business to rebound in 2021 with anticipated growth in China seen as a significant factor.
According to the latest short range outlook from the International Rebar Producers & Exporters Association (IREPAS), this year ‘looks very likely to be a year of rebound, a year of multilateral boosts to the global resurrection, with less political uncertainty’.
While it believes demand will be good, the association cautions ‘we will not be seeing the same spread during the rest of the year that we are currently observing in this first quarter’.
IREPAS says China will be key although it concedes that, because its own steel exports are increasing, ‘future price hikes may be moderate compared to December 2020’.
‘We will probably have to wait until China returns from its holiday to see where exactly the market will be heading,’ the insight says. ‘We are hoping for the Chinese to come back from their holiday to lower production.’
According to the World Steel Association, crude steel output in China last year rose 5.8% compared to 2019. In December, China exported 4.85 million tonnes of finished steel, up 3.5% year-on-year, according to Eurofer. Even so, China’s exports over across 2020 were down 16.5% on 2019.
IREPAS believes scrap markets will stabilise during February. ‘Prices may have risen too rapidly to levels which they should not have reached, on the back of speculative activity and a correction was certainly expected,’ it says. It expects the scrap market to be tight with elevated demand because of strong steel production and extended order books.
‘Nowadays, scrap prices are descending to levels to which they should not drop because of supply pressure created by some hidden cargoes offered on prompt basis.’
The outlook says an ‘unexpected hype’ in prices of scrap and steel since December had suggested a possible super cycle in 2021. But, after very strong demand, the market in January was now ‘more sensitive’.
‘It was thought back in November that domestic scrap prices in China would reach international prices, but instead international prices have reached the levels of Chinese scrap prices seen in November. Cost of production seems to be the last thing on the minds of those who are the market decision-makers on sales prices. Not even the Chinese have this issue figured out as they have a rebounding economy and worse margins now than back in November last year.’
IREPAS saysthe current status of the market can be described as ‘generally unstable with some fluctuations’. It concludes: ‘The outlook is quite satisfactory even though we will have greater clarity by late February.’
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