The situation in the global long steel products market is deteriorating and the outlook for the final quarter is ‘bleaker and unpredictable’, says the trade association IREPAS in its latest short-term outlook.
‘We have entered a rising-cost business cycle. Inventories are lasting a lot longer than expected due to the lack of demand in the market. The situation is dramatic, to say the least, and huge uncertainty lies ahead in the coming month.’
More positively, it is noted that raw material prices have stabilised, even if only temporarily.
IREPAS suggests Europe is hardest hit, with steel mills and consumers facing an unprecedented increase in energy prices, inflation and logistics problems.
‘Prices in the EU are high and increasing due to the current geopolitical situation and production cuts are expected soon.’ IREPAS says lower production will balance a drop in demand due to higher interest rates and costs.
‘Insufficient quotas are not helping to get prices down in the EU and so inflation continues to increase. On top of all these factors, the US dollar-euro [and sterling] exchange rate makes imports more expensive. Availability and costs of energy will be a major issue in the EU and may be a big obstacle for the regional manufacturing industry.’
Turkish mills under pressure
The review notes a recent increases in power and gas prices in Turkey, upping the cost of manufacturing steel by US$ 40 per tonne, meaning mills will have to pay this from their own pocket for all orders booked for September, as they were not included in calculations when orders were placed. Another problem for Turkish mills is that offers from Russia are around US$ 100 per tonne lower.
In the US, however, demand and supply remain largely unchanged, according to the outlook, although competition from imports has become ‘thinner’.
More closures anticipated
‘European steel producers have announced closure after closure,’ the outlook reports. ‘More announcements of closures will escalate in Europe and elsewhere. Obviously, this will raise prices and make importing more interesting on paper, though it remains to be seen whether it is worth the risk because larger closures of other economic activities could be observed as the winter approaches.’
It goes on: ‘Under all the above circumstances, the market can be described as unstable and fluctuating. The outlook for the next quarter looks bleaker and is unpredictable.’
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