The steel market is recovering strongly following the Covid-19-pandemic-induced lows seen in spring, but steelmakers should not restart furnaces too early and pressure the market. So says the International Rebar Exporters and Producers Association (Irepas) in its latest short-range outlook sent to Kallanish.
Most mills outside China are suffering with depressed production and financial performance, while winter may bring a second wave of the Covid-19 pandemic. Ongoing political uncertainties are further clouding the outlook, although regional markets are performing well and prices are firming up.
European cut and benders are seeing demand rebound, with only a few projects on hold. However, they took in too many orders at low prices earlier this year during the worst period of the coronavirus – expecting prices to collapse – and are now confronted with stable-to-rising prices due to increasing raw material costs, Irepas says.
Demand in North America has also returned, with costlier raw materials and imports supporting US steel prices. However, the second pandemic wave will curtail further increases.
Brazilian capacity utilisation has rebounded to 60.5% from 48.5% in June, but steelmakers’ plans to raise utilisation further by increasing exports will be difficult due to excess capacity and protectionist measures.
The strong market recovery means inventories in the supply chain need to be replenished. The rebound is being driven by China, where investment activities and stimulus measures are generating demand and making China a net steel importer. Competition in the market remains intense, however, particularly in Asia where price changes of $1/tonne can swing the focus of buyers to supplies of a different origin.
“Service centres in Europe and the US have been low on stocks and, with any sign of an uptick, those stocks are being replenished with higher transaction prices resulting,” Irepas observes. “The increase in prices that has followed the rise in raw material prices is positive for those who have sufficient stocks for September.”
“The key here is that steel producers should not be misled by the current demand into firing up more of their furnaces, which could exert more supply pressure on the market during winter,” the association adds.