The pandemic has created difficult market conditions in the steel industry, with backlogged building applications and delayed investments weakening demand, according to Irepas’s monthly short-range outlook.
The situation in the global long steel products market did not improve much last month. There has been a reduction of both supply and demand around the world, except for in China where output keeps growing. China used to produce 50pc of the world’s steel, concrete, aluminium and other products, but today it produces close to 65pc because of the production decline in the rest of the world.
When China reopened after its lockdown, pent up demand was so high that very short period of time, it returned to near pre-pandemic volumes. Moreover, China took advantage of low semi-finished steel and hot-rolled coil. Today, production in China is running smoothly, demand is robust, and it’s expected to stay that way for the rest of the year.
Steel demand has been strong in Asia over the past month, as evidenced by China’s industrial sector having a strong June. The rest of the world is gradually reopening following COVID-19-induced lockdowns and stimulus activities are buoying markets the world over, with the manufacturing and construction sectors playing vital roles and boosting steel demand.
The reopening have caused steel mill utilization rates to start rising, as well. Scrap inventories were depleted in May because the industry closures meant there was little scrap in circulation. Buying in June surpassed the normal monthly levels and more had to be restocked.
The outlook for Q3 2020 is very good for raw materials, as markets rebuild. However, it is difficult to make a prediction for the long products segment, for which Q3 could be its worst quarter of the year.