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

China’s steel output restrictions will drive the country’s demand for imported steel and support higher prices, according to the Irepas monthly short-range outlook.


Output cuts in China amid environmental concerns will spur steel product trading, especially for billets, which could lead to a price increase for semis worldwide, while ferrous scrap prices could remain under pressure from lower demand, Irepas noted. Still, production in China is based on iron ore, which has already gone down a notch because of which, the impact on ferrous scrap pricing may be limited.


The global long steel market could also be impacted by the slow down in the Far East and Southeast Asia as Indian and Vietnamese mills are exporting the product, while new plants in Indonesia and Japan are making historic profits, with South Korean mills likely to follow this trend. 


In Russia, the mills close to the country’s ports continue exporting steel products, despite an increase in export duties. The Russian government imposed export duties on a wide range of ferrous and non-ferrous metals from August 1 through December 31, 2021. The duty’s base rate is 15pc, but the minimum duty level is set specifically for each product. For example, export duty for hot-rolled flats, rebar, and billet are currently no lower than $115/mt and $133/mt for cold-rolled flats and wirerod, respectively.


European steel production strengthened in January-July 2021 more than many other regions, according to Irepas. As a result, scrap demand inside the European market has been stronger than usual, and this trend could continue through the rest of the year. The supply of higher quality scrap grades and industrial scrap has become tighter in this region.


Demand for steel in the US is high, but supply seems to be catching up with the demand. However, shortages remain and imports are unable to fill the gap due to shipping constraints.


Irepas indicated that freight continues to remain a major headwind, with traders who have burnt their fingers over high and unpredictable freight costs becoming more cautious. Irepas observed that traders are unwilling to book on a fob basis even though it is risky to make offers on a cfr basis, making it more difficult to get a quotation.


With regards to macroeconomic data, a thrust on infrastructure development by most economies promises a bright outlook for the global long products market. COVID-19 may continue to impact the post-pandemic rebound, but an increase in vaccinations could soften the blow as demand continues to strengthen, Irepas forecasted.

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