The war in Ukraine has distorted the global long steel products market and is once again being led by supply rather than demand, according to Irepas.
The latest short-term outlook from the international organisation for rebar producers and exports says the Russian invasion has ‘fundamentally altered the flow of raw materials and finished products almost overnight’.
It goes on: ‘Before the war, the expectations were that demand would determine the direction of prices, contrary to 2021 when supply was the driving factor. Today, however, supply has definitely taken the lead again and the market is in fact distorted.’
While scrap exports from Russia and Ukraine are almost at a standstill and EU steel mills refusing to pay more for scrap and reducing their capacity utilisation rates, the outlook notes that Turkish mills have sought the extra availability of European scrap, helping keep scrap prices under control while they are exporting extra volumes of steel to the EU market.
It also reports the emergence of a price imbalance between Asia and rest of world with European prices the highest.
‘The western hemisphere has stable demand with short supply depending on the product. There is stable demand also in the eastern hemisphere but the strong presence of Chinese and Southeast Asian producers results in a price difference between these two regions. Consequently, there is a price imbalance between Asia and the rest of the world.’
IREPAS says the difference between Turkish origin reinforcing bar and wire rod prices and Chinese, Vietnamese or Malaysian origin reinforcing bar and wire rod prices is more than US$ 100 per tonne.
‘The price difference between the North American and the EU/UK markets is even greater. European steel prices are now the highest in the world. Asian and especially Chinese prices are substantially lower than anywhere else. The steel trade is changing direction from selling to Asia to buying from Asia.’
The reduction of capacity utilisation rates in the EU and the fears of stoppages by some mills are resulting in higher demand from the market than usual as construction companies look to secure material for their projects. ‘Prices have increased significantly with the lack of import options supporting the upward movement.’
With US mills are running at full capacity, Irepas expects any increase in demand to be met by imports. It notes prices in the US are also on an upward trend, catching up with the rest of the world.
In conclusion, the outlook says: ‘Scrap price increases will continue but the war is a major negative factor for the market. It will take some weeks for the market to find its equilibrium. Under the current circumstances, the market can be described as fluctuating and unstable. The outlook is very uncertain as the fundamentals may change daily.’
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