European long steel round-up: mills withdraw offers

Producers in the Northwest European rebar market pulled offers in the week beginning 2 March, amid the escalating conflict in the Middle East.

Steelmaking and distribution sources confirmed that rebar producers were withholding offers since the start of the week, awaiting clarity on potential cost drivers, and gauging demand prospects for near-term price increases.

“European mills are totally out of the market for now,” said a domestic steelmaker, “it makes more sense to wait and see before trying for higher prices, which we need, but we first have to assess what buyers will actually be able to accept.”

McCloskey’s sources were unwilling to speculate on the price point at which mills might return to the market; buyers have visibility of rising natural gas prices and upward pressure on electricity costs, which they expect sellers to attempt to pass on to consumers.

European steelmakers were said to be capitalising on the Middle Eastern conflict by pressuring for a review of the EU’s electricity market design, which sets the market price of wholesale electricity in reference to the most expensive energy input utilised – which for the EU means natural gas prices often inflate industrial electricity costs.

Somewhat surprisingly, sentiments were mixed as to whether the EU would see enough inflation in electricity prices to force buyers to meet producers mid-way on cost coverage, with some in the market anticipating a minimal impact due to recent US commitments to both insure and escort natural gas transit through the Strait of Hormuz.

Import offers – where valid – were reported at stable prices, though traders remain generally unwilling to engage with international trading of rebar due to poor profit margins against domestic production. Turkey, the dominant rebar exporter to Europe, is increasingly dealing directly between mill and EU consumers, presenting further limits on traders’ speculative opportunities.

This week McCloskey reported increased rebar demand in Europe for Turkish origin material at a price point of $545/t FOB, coinciding with the withdrawal of domestic steelmaker offers. Said material could reach Northwest Europe at prices competitive enough to incentivise distributor orders, especially given the potential for material to arrive in advance of the EU’s revision of its steel safeguard system, which is expected to be implemented for July.

However, both buy- and sell-side sources tell McCloskey that domestic rebar demand remains subdued, and doubt whether price increases will be accepted in the market at all, regardless of the subsequent sustainability of any uptrend.