The situation in the global long steel market has not changed dramatically over the past month, but demand is estimated as more or less satisfactory, taking into account the reduction in both supply and consumption in the world, according to the latest monthly report from IREPAS, the global association of producers and exporters of long steel products. The mills able to operate at above 60 percent capacity are considered to be the lucky ones, while those working under 50 percent should be in trouble.
Domestic business activity in the longs markets has been gradually reviving as generally the segment was hit by Covid-19 to a smaller extent compared to the flats segment, where end-user industries were affected. In addition, as the markets keep opening up after the lockdowns, stimulus activities are supporting trade and boosting demand. In Europe, some countries like Italy, France and Spain were hit harder in terms of longs demand compared to others, and generally the mood in the EU market is far more negative. Some concerns exist regarding the public sector and whether there will be additional finance injected, but also there are fears that a lot of private investment may be put on hold.
China remains the key supportive factor as it keeps buying huge volumes of semis and also HRC, taking advantage of pricing being lower compared to its domestic market. IREPAS expects China’s demand to remain strong up to the end of the year, and so for now there is no expectation that China will actively return to exports which would certainly not be a welcomed step, SteelOrbis understands. However, there are some concerns that instead of the fear that“cheap steel from China will flood the market”, “cheap steel from Europe” will be searching for sales destinations. Currently, China produces close to 65 percent of steel globally versus the usual 50 percent, while the increase is attributed to higher production rates in China itself and lower output in other countries.
The raw materials situation has been better with June scrap buying exceeding the levels of the previous months due to higher utilization rates and production reopening after April-May shutdowns. However, IREPAS underlines that political issues remain a destabilizing factor, adding to the general uncertainty in the market.
Overall, IREPAS estimates the outlook for the next quarter to be very positive from the raw materials point of view as the markets are recovering and receive some support from governments. However, it is rather difficult to make a prediction on the longs side as the next quarter could be the worst quarter of 2020.