Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Uncertain demand and protectionism are affecting the longs market, according to the latest Irepas monthly short-range outlook. 


The outlook indicated that protectionist efforts are shrinking the exports markets as the EU, Canada, the US, and other major importers launch antidumping and countervailing investigations to extend protections to domestic markets from unfairly priced imports. 


For instance, the EU has increased its scrutiny of Turkish flat and longs imports at the request of domestic mills that are recovering from COVID-19 related shutdowns. Turkey, in turn, has threatened duties on steel products from the EU. Turkish steel exports to the EU fell by 44pc in the first four months in 2020 compared to the same period last year. In the same period, Turkey’s steel imports from the EU increased by 7pc. 


Countries like Russia with low-cost production have an opportunity at temporarily gaining market share by taking the lead with lower export prices facilitated by lower production costs. 


Uncertainty looms

Consumption in the global long steel products market seems uncertain even though prices are increasing in Asia, specifically China, amid stimulus efforts and COVID-19 recovery. The World Steel Association still foresees an increase in steel demand in China this year, predicting a rise of 1pc from 2019 to 916.5mn mt. Demand in the rest of the world, excluding China, however, is expected to contract by 14pc in 2020 from last year. A strong Chinese recovery will support longs worldwide, but full recovery could take place only by the end of 2021.


Forecasts for the longs market are also influenced by region. In Brazil, crude and rolled steel outputs fell by 39pc and 36pc, respectively, in April, while its semis output declined by 24pc, all compared to the same month last year, according to the Brazilian Institute of Steel. Domestic steel sales in April decreased by 36pc, in line with apparent consumption of steel products, which fell by 35pc. Brazilian exports fell by 17pc in April 2020 compared to the same month in 2019. 


In the EU, new building permits in May were substantially lower than March and April and many projects have either been put on hold or stopped. The EU and US markets are facing a situation where buyers are hesitant to place large forward orders and are buying only as needed for the short term.


Italian and Polish mills are selling at reduced prices to collect cash, and this has pulled the market downwards. 


On the other hand, Japanese and US mills have announced long-term production cuts amid idling of BOF’s and reduction in EAF production to balance supply and demand.


Reviving demand

However, the ferrous market is showing green shoots of recovery amid tight supply and a revival in demand as mills return to production post-COVID-19 suspensions. Raw material inventories that were depleted, are being rebuilt as the markets reopen after the lockdowns because of which, import prices from Turkish scrap mills have increased consistently over the past month.

The status of the longs market is unstable at present and future remains uncertain though investors and industries are showing optimism. 


Globally, market players are hoping that June and July will be months of stabilization in preparation for a recovery later in the year.


US rebar market 

On May 13, Davis Index reported US domestic rebar prices falling to 28.95-29.95¢/lb ($579-599/nt, $638-660/mt) fob mill, down by $1-23/mt compared to late February. In June, rebar is at 28-29¢/lb ($560-580/nt, $617-639/mt) fob domestic mill, down $21/mt compared to a month ago. Buyers report a steady price level as domestic mills remain competitive against lower prices imports as the latter do not display enough spread between domestic and imported prices. 

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