Manufacturers around the world
suffer from limited market access and high levels of competition, especially
from Russia, which is extremely flexible in pricing as Russian producers look
for any possible new markets.
As global long products face a
rising cost economic cycle, the market is currently in a dramatic situation
characterized by longer inventories and lower than expected demand. Uncertainty
awaits global markets in the coming months, although Europe and the rest of the
world seem to follow very different trends, according to the Association of
Long Products Manufacturers and Suppliers (IREPAS).
Steel producers and consumers in
Europe are currently facing unprecedented increases in energy prices, and the
EU's logistical crisis is worse than ever as cargo gets stuck due to dry rivers
and a shortage of truck drivers. And although most of the participants in the
global steel market expected "after the holiday price increase" in Europe,
prices are still rising, and production cuts are probably not far off. The cuts
will balance low demand with higher costs, pushing EU factory prices up
significantly.
In the US, supply and demand
followed a typical summer lull, but import competition has waned due to severe
congestion problems at almost all US ports, where unloaded cargo can take
months to arrive. A shortage of manpower, from truck drivers to office
managers, has exacerbated logistical problems.
Turkey is also facing rising
energy prices, with steel production costs skyrocketing $40 a ton, meaning
Turkish mills will have to absorb higher costs on all orders booked for
September shipment. Turkish mills also face competition from Russia, where
steel prices are on average $100/tonne lower, regardless of product.
On a positive note, commodity
prices have finally stabilized, although this is expected to be temporary.
Margins are still maintained in some areas, and prices for long products in
some markets are higher than those for flat products, indicating either limited
supply or good demand.
In general, however, prices are
not expected to increase until supply meets demand, which could happen towards
the end of the year. European steelmakers continue to announce plant closures,
which will raise prices and make imports attractive, although it remains to be
seen whether imports will be worth the risk given the wider shutdown of other
economic activities as winter approaches.
However, European mills can
import slabs and billets produced in countries that have not been hit as hard
by the European energy crisis, and the only question is whether these imports
will be allowed without quotas. However, it seems clear that Russian exports
will undermine prices and hurt many manufacturers around the world, especially
Turkish factories. Producers around the world suffer from limited market access
and high levels of competition, especially from Russia, which is extremely
flexible in pricing as Russian producers look for any possible new markets.
Given the circumstances mentioned
above, the global long market can be described as unstable and volatile, but
even though the situation in Europe looks bleak, the measures that the EU has
just announced will help reduce the crisis. For the rest of the world, uncertainty
reigns in the fourth quarter.