Pandemic consolidates longs market trends, outlook uncertain: Celsa

Global long products consumption will likely fall -2.7% on-year in 2020 to 878.6 million tonnes, with sections used mainly in commercial construction seeing the steepest fall, according to Alexander Gordienko, International Sales Manager at Celsa Group.

The Covid-19 pandemic has meanwhile consolidated the existing trend of steel production and consumption moving away from advanced economies to Asia. “It hasn’t changed the direction of the market,” Gordienko said during Monday’s virtual International Rebar Exporters and Producers Association (Irepas) meeting attended by Kallanish.

The Asian growth is being driven by China whose government has implemented a mammoth $527 billion infrastructure investment programme in 2020, up 90% in value on 2019. Chinese longs exports are consequently seen falling -24% this year to 6.4mt, with flats down -16% to 16.3mt.

Global rebar consumption fell -1.8% on-year in the first half of 2020 after reaching an all-time annual high of 410mt in 2019. All countries were affected bar China where use rose 4.8%.

Wire rod is performing better than rebar this year due to wire rod capacity being idled, especially in Europe, and China exporting less material. The idled capacities are not easy to bring back online as they are mainly blast furnace based. This trend will remain for some time, according to Gordienko.

Asked how rebar prices have managed to stay afloat despite the pandemic, Gordienko observed that most rebar mills are scrap-based electric arc furnace plants that operate on tight margins dictated by scrap prices. The pandemic resulted in a scrap shortage, which caused pressure on prices of the feedstock. Secondly, China was importing huge quantities of semi-finished products from all over the world. “That created a bottom for the market,” Gordienko said. “If you couldn’t sell rebar… you just sold billet to China.”

The Turkey scrap import-rebar export spread is at a historic low, but should improve significantly in H2 as the market rebounds, Gordienko observed.

A second pandemic wave and related lockdowns, the US presidential election, China decoupling from advanced economies, and supply chain reshuffling are all causing uncertainties in the market, however.

Moreover, although the European construction sector is seen performing well until February next year, there is a big question mark over activity thereafter. Most observers expect infrastructure projects to drive the rebound, while the non-residential segment will be significantly affected due to changing trends following the pandemic.