Irepas calls for further steel production cuts

A number of factors including production cutbacks from steelmaker ArcelorMittal and summer mill maintenance could help to push up the prices of long products in the EU, global rebar association Irepas said in its latest Steel Outlook report.

But it said more producers and scrap melters need to look at cutting production to reduce oversupply and push up prices.

Irepas warned that the EU quota system, which has not had the desired effect, could negatively impact prices. An influx of cargoes largely from Turkey and Russia when the quotas opened in February and April meant stockyards filled up, weighing on prices. The new wave of imports in July is expected to cover much of the summer demand.

Sliding scrap prices have failed to support rebar, the report said. The Argus ferrous scrap HMS 1/2 (80:20) cfr Turkey index was down to $292.80/t yesterday from a two-month high of $314.90/t on 28 May.

But Irepas expects scrap generation and stocks to dwindle in the coming months as a result, pushing up prices as availability wanes. "Demand and supply will become better balanced and stabilise pricing," the association said.

China is taking advantage of low scrap prices and is adding additional electric arc furnace (EAF) capacity to meet strong domestic demand. Irepas expects it to continue to ramp up steel production and surpass 1bn t in 2019 at current speeds.

Conversely, Europe and Turkey have been hit by a slowing automotive sector and political instability, respectively. ArcelorMittal is so far the only blast furnace-based producer that has announced cutbacks in production to increase prices. While this seems to be working at the moment, US capacity has been added recently, which may mute any increased demand.

The industry faces challenges in 2019 but steelmaking is in a strong position compared with 2014 and 2015, Irepas said.