Lack of demand threatens steel price stability: Irepas

A trend of rising raw material and finished steel prices cannot continue for much longer because of a pronounced lack of demand, steel industry association Irepas has said in its short-term outlook.

Weighing on the market are geopolitical pressures such as Brexit, trade wars and the new IMO marine fuel sulphur regulations, which are driving up shipping costs. Strong global competition across all products because of global oversupply has driven many countries to impose safeguard measures, including the EU and US, which is driving competition to China. "Indian, Turkish, Russian, Brazilian and southeast Asian suppliers are competing for every dollar in China," the association said. But hopes of a US-China agreement could provide respite to the market.

Low scrap inventories have meant restocking by mills before the winter has pushed prices up. The Argus daily ferrous scrap HMS 80:20 assessment bottomed out at $221.20/t cfr Turkey on 30 September and hit $259/t cfr Turkey today.

Irepas expects long product prices to follow scrap prices up but the evidence of this has been muted so far. In the same period, scrap experienced a $37.80/t price rise, while the Argus daily Turkey rebar assessment increased by only $15.50/t to $412.50/t fob today.

Although mills have hiked their offers, the market remains unconvinced that solid demand exists for long steel products. Turkish rebar offers are currently at $415-430/t fob but recent sales have been heard only on a sporadic basis and for small quantities to regular markets such as Ethiopia, Yemen and Israel. Unrest and protests in Lebanon are also dampening rebar demand.

Despite a lack of upward direction for rebar, steel billet has managed to strengthen, mainly because of scrap prices becoming prohibitively expensive for many mills, which instead choose to buy billet to roll. The daily Black Sea steel billet assessment has gained $27/t since the beginning of October to reach $380/t fob today. Some demand from China also lent temporary support to prices, although the arbitrage has largely closed to this market.

Irepas has higher hopes for flat products than longs, as German industrial activity picks up, although the association warns it is too soon to tell if this can be sustained. "Industrial activity bottomed out and then increased in the German market, bringing with it the surrounding areas in Europe. However, there are still too many uncertainties and, with winter approaching, the situation regarding what may happen in the first quarter next year remains unclear," it said.

The Argus daily hot-rolled coil (HRC) northwest Europe assessment has lost much of its value this quarter, reaching $414.25/t ex-works on 31 October after a steep fall from $449.50/t ex-works at the beginning of the month. But November has seen the price hold steady at around $413/t ex-works, sending positive signals to the market that there is a stabilisation.

"The future is uncertain as the outlook is not good because of the lack of demand and of price levels. The market outlook can be described as challenging," Irepas said.

By Sara Warden