IREPAS in Athens: Markets in unknown territory
The 92nd meeting of IREPAS (the International Rebar Exporters and Producers Association) was held in Athens on April 27-29 in conjunction with the SteelOrbis Spring’25 Conference.
There were 143 representatives from 49 different producers among the 502 registered delegates from a total of 58 different countries. There were also 97 registrations representing 50 different raw material suppliers.
At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, said that the global long steel products market is currently overwhelmed by a spiral of duties and trade measures and protectionism such as has never been experienced before. He stated that the recently created uncertainties in the market on top of the already existing problems, the markets are now somewhat lost.
The IREPAS chairman added that the current environment is not bright and the level of competition in the global market is very strong, being almost at maximum levels.
On the last day of the conference, producers of long steel products, as well as traders and raw material suppliers, shared the conclusions reached at their special committee meetings regarding the current situation in the markets with the general participants at the event.
Raw Material Suppliers at IREPAS: Challenging year ahead, market will be much slower in H2
Jens Björkman, the chairman of the raw material suppliers committee, noted that the EU steel industry has started the year quite well, though steel production in the region was low in the first quarter. He highlighted that the new German government is expected to ease the pressure from the uncertainties on the market, which may boost steel production. Noting that the green transition in the EU seems to be postponed, indicating that there seems to be no viable transition until at least 2030, he stated that a lot of mills in the EU will start shifting from the blast furnace route to the electric arc furnace route in the next five to 10 years and there will be uneven demand for scrap until that time. Addressing the scrap export restriction plans in the EU, he stated that, as scrap demand is low in the region now, any restrictions would put pressure on the steel industry but may also lead to more bureaucratized trade between scrap generators and steelmakers.
Regarding the Trump administration’s tariff actions, the chairman of the raw material suppliers committee stated that, in the first few months this year, sales to the US were at enormous levels as a new tariff was anticipated. Noting that EU-based mills were running at high capacity to export to the US before the implementation of new measures, he said he believes that the market will be much slower in the second half of this year. He added that Trump’s second term will be much different than his first term. In addition, he expressed the belief that, despite the actions taken by the US, Canada and Mexico will not impose tax on steel exports to the US as the US is their biggest trade partner and a restriction would hurt their own industries.
Björkman stated that iron ore prices have been fluctuating at around $100/mt CFR, compared to $89/mt CFR seen in September 2024, due to higher production at the end of last year and early this year. He noted that, if China lowers steel production and the general output of iron ore increases, these two factors together will result in lower iron ore prices.
Traders at IREPAS: No reduction in US tariffs expected, trade conditions remain challenging
F. D. Baysal, the chairman of the traders committee, stated that, although the US imposing new 25 percent tariffs on imports from the countries previously exempted from the Section 232 measures seems like an advantage for the countries such as Egypt and Turkey which were already subject to 25 percent tariffs, only 18 percent of total imports into the US was from the Section 232-paying countries and 82 percent was from the exempted countries. He added that, despite the advantages some countries will gain, there will be no improvement in the market conditions given the economic uncertainties and the general market slowdown. Also, he said he believes that there will be no reduction in the US tariffs.
Looking at the EU, he said there have been some reductions in the import quota volumes, resulting in more challenging trade conditions. Considering the increased sales of wire rod and HRC over the past quarter from the ASEAN region to the EU, Mr. Baysal noted that, even though there are some restrictions on certain ASEAN countries, the EU is now more open to those countries compared to its old traditional markets given the free trade agreements between the EU and some Southeast Asian countries.
Mr Baysal added that he foresees no reduction in China’s exports and capacity utilization going forward.
Producers at IREPAS: Markets in unknown territory because of tariffs
Murat Cebecioğlu, chairman of IREPAS and also chairman of the producers committee, pointed out that the hot topic during the producers committee meeting was tariffs and their effect on business, adding that this is completely unknown territory and that nobody has any idea where things are headed at the moment, which makes it very difficult to conduct business.
He said that, as the Chinese domestic market is not doing so well, China will still be the main factor depressing prices as it is heavily dependent on exports and its prices are quite low compared to those of other exporters. He went on to say that the stimulus package is not helping much at the moment to boost to market, which is why China is selling billet to countries like Turkey and many other countries.
The IREPAS chairman noted that, as billet is a competitive alternative to scrap in terms of price, particularly Turkish mills will keep buying billet, adding that, as long as prices are at the current levels buying billets is much more profitable, even though the lead times from Asia are two to three times longer.
Commenting on the GCC shifting from being an importer to being an exporter, Mr. Cebecioğlu said that the reason they are exporting is that they have overcapacity, and are selling to the EU, especially Germany, and to North Africa and Israel. He indicated that the answer to the question on whether their exports will continue depends on how infrastructure projects will take shape in the region in the coming period and how much of that demand the local market can absorb: otherwise, they will continue to export.
Jamie Mcleod at IREPAS: EU is taking steps to simplify CBAM but not weakening it
Speaking at the SteelOrbis Spring 2025 Conference & 92nd IREPAS Meeting taking place in Athens on April 27-29, Jamie Mcleod, director at consulting firm Crowe U.K. LLP, talked about the EU’s Carbon Border Adjustment Mechanism (CBAM) which is in its transition period right now, stating that in January 2026 the definitive period starts, imposing a levy on carbon-intensive goods imported into the EU, with steel being the most affected good.
Mr. Mcleod said that the transitional period is only the reporting phase and the 5th quarterly report is due to be submitted in April, marking the third report requiring actual emissions data, as default values are no longer permissible for the rest of the transition period.
He underlined that obtaining reliable and complete actual emissions data remains a significant challenge. If actual data is unavailable, CBAM declarants must demonstrate that they have made all possible efforts to obtain it.
Regarding the CBAM, Mr. Mcleod stated that, apart from the obvious results, another practical result of the mechanism is that it will generate billions of revenues for the EU.
The EU is taking steps to simplify the CBAM but is not weakening it. He went on to say that the EU is proposing a mass-based threshold of 50 mt per importer per calendar year, meaning that, if an importer imports 50 mt for the whole year, they will be exempt from CBAM obligations. However, he noted, most steel importers will be over that threshold.
He warned that, from 1 January 2026, only authorised CBAM declarants can import CBAM goods into the EU.
If you are supplying to EU, you need to be authorized and applicants must have a strong compliance history, no customs debts, sufficient financial standing to meet their CBAM obligations, and suitable internal processes to demonstrate adequate CBAM management.
While EU importers are directly responsible for CBAM reporting and charges, the CBAM impacts the whole supply chain, the Crowe U.K. official pointed out.
Touching upon the UK’s CBAM, Mcleod indicated that it will come into effect in 2027 and that there will not be a transition period, adding that alignment between the UK and the EU could mitigate trade impacts for trade of CBAM goods between the parties.
Trade policy panel at IREPAS: Steel trade under pressure from tariff war
Summarizing the actions of the Trump administration, Matthew Nolan, counsel at ArentFox Schiff LLP, stated that the exemptions from the Section 232 tariffs have been lifted and duties have been almost doubled.
He also pointed out that the announced reciprocal tariffs have been postponed except for the 10 percent duty that every country has to pay. Stating that the US duties on Chinese products will result in some US companies running out of inventories, Mr. Nolan said it is going to be the downfall of the US economy. Saying that the chances of the US fully implementing reciprocal tariffs are very low, he said he believes that the US will sign agreements with some countries, leading to much lower tariff levels.
Regarding the non-tariff barriers and the challenges that companies face, he highlighted the ‘melted and poured’ rule in the US and the restrictions regarding Russian material.
He recommended that exporters navigating the current uncertain trade environment should be patient and added that he does not think the current extreme volatility will last forever and that the US will have to find another way to make its measures sustainable.
The next speaker, Nikolay Mizulin, partner and co-leader of International Trade at Mayer Brown, stated that the trade barriers reflect that the steel markets are increasingly becoming fragmented. Recalling that the EU has also postponed its counter measures against the US, he stated that the negotiations between the US and the EU are continuing, though, in his view, an agreement is unlikely.
He highlighted that the main problem is not the lack of an agreement between the parties but the diversion of steel from the US to the EU from other countries. Pointing out that the current EU safeguard measures will expire in June 2026, Mizulin noted that, as mentioned in the Steel and Metals Action plan, the European Commission will come up with a new protectionist tool, which is planned to be more effective, to replace the current measures in the face of the overcapacity problem.
Stating that the EU has also introduced a ‘melted and poured’ rule, he also added that the CBAM will also play a significant role in the EU’s trade going forward, affecting trade flows.
Meanwhile, regarding developments in the EU steel industry, Bülent Hacıoğlu, managing partner at Trade Resources Company, stated that exporters to the EU will not have a break from tariffs given the new protectionist measures planned.
Saying that the European Commission will no longer wait for actual material injury to occur to implement investigations, Hacıoğlu also highlighted that dumping margins will be much higher as zeroing and lesser duty rules in the EU no longer apply.
Looking at the US, he stated that both the Trump and Biden administrations focused on Customs and Border Protection and added that the current US government will prioritize making sure that all tariffs or duties imposed are collected.
Noting that currently two thirds of all nations in the world have larger trade volumes with China that with the US, he said that the US needs to figure out another way not to experience a recession.
IREPAS Short Range Outlook : February 2025
Global longs market under very strong pressure from Chinese exports, Trump 2.0 brings uncertainty and volatility
The global long steel products market is currently under very strong pressure mainly because of Chinese exports, which have been increasing and not showing any signs of slowing down. We have already seen what Trump 2.0 means – uncertainty, volatility and a lack of visibility. It seems like the situation will get even worse until the dust settles and his goals are clearly understood. So far, Trump’s announcements have given rise to concerns about inflation, which will slow down interest rate cuts.
US long steel and construction segments waiting for the dust to settle
The market in the US has entered a waiting period in terms of the outcome of some of the decisions already made by the White House and others under consideration and delayed for further negotiations. New infrastructure projects are on hold, amid the government freeze on spending. Interest rates have not come down and there is no clear sign for the near future, thus delaying many projects and also purchases by would-be home buyers. Labor shortages in the construction sector are becoming a near certainty, causing delays and higher costs for construction developments. Domestic rebar producers are reluctant to increase prices for another 30 days, until there is certainty regarding the duties on Mexico. They are generally competing with each other rather than with imports, which are very light.
All eyes still on China
On the other hand, the real determining factor for rest of the world other than the US is China, simply because the US is now a separate world for the global steel market. We all need to wait and see what China’s policy in the current year will be: will they continue with steel exports of over 100 million mt or will they slow down to help the global market to stabilize?
EU mills locked in cycle of low demand and high costs
The EU steel market is suffering from continuing low demand for long products, with European mills locked in a cycle of poor demand and high costs. The construction market in most EU countries is still very slow due to seasonal reasons but also in general due to much less demand from investors. In this context, the merger of Badische and Van Merksteijn will certainly have an impact in terms of consolidation. Meanwhile, energy prices in Europe are once again at levels not seen since 2022. The cold winter and the shortage of base load in Germany have pushed electricity and gas prices to their highest levels of the last three years, at least until the end of spring. These higher costs will force long steel producers in the EU to increase prices and to shut down more capacities in 2025. Feralpi seemed to have stopped production completely in January, while Riva Germany officially announced shutdowns to run from January 1 to March 30.
EU’s long steel import quotas quickly exhausted at start of year
The EU’s import quota for “all other countries” was exhausted on day two or three at the start of the year, with the huge volumes which were imported by Bulgaria and Romania. This means there will not be more imports from “all other countries”. Turkey and Algeria are mostly not competitive enough to attract EU importers. The price increases announced by German and Italian mills have not yet been accepted by the market but they probably will be as soon as benders have to restock, especially given the current euro/US dollar exchange rate. The very strong US dollar is another factor keeping prices low in the international market.
Protectionism is the new magic word, consumers to lose out
Protectionism seems to be the new magic word for economies worldwide. The markets are running into a spiral of protectionism in which everybody will lose out, especially the middle-class consumers and industries.
Longs mills forced to cut outputs, low profits make environmental targets unattainable
Mills in the long steel products market are forced to lower their capacity utilization rates, which will negatively affect their cost of production. There is a chain reaction of displaced export capacities due to Chinese exports. The steel industry is also suffering from a lack of profits, that makes it impossible to achieve net zero commitments.
Current market very difficult to operate in, outlook very unpredictable and unstable
Under these circumstances, the current status of the market can be described as unstable and very difficult to operate in. The outlook for the next quarter is very unpredictable and unstable.
Global markets face economic strains, inflationary pressures, trade measures: Irepas
The global economy faces significant challenges amid uncertainties over US trade policy before the Trump administration takes office Jan. 20, the International Rebar Producers & Exporters Association, or Irepas, said in its latest short-term outlook released Jan. 17.
The proposed tariffs, including a 25% duty on imports from Canada and Mexico, could disrupt supply chains, raise costs and increase global economic strains, Irepas said, adding that rising borrowing costs could further burden industries like construction, which were already struggling with low demand and inflationary pressures.
While some importing countries already subject to Section 232 tariffs, like Turkey, may benefit from a more level playing field in the US, the proposed tariffs may also increase costs for domestic construction, it said.
“These costs impact businesses, especially in capital-intensive industries like construction and could slow economic growth further, thus adversely affecting steel demand in general,” it said.
The pressure on the global long steel products market had been increasing as there was no positive news from China yet, while there was weak demand, market protection and excess capacity, Irepas said.
The EU was expected to announce a revision of its protective measures on April 1, while Turkey and India have already announced market protection measures, it noted.
India launched a safeguard investigation on imports of non-alloy and alloy steel flat products on Dec. 19, while Turkey started an antidumping investigation on cold-rolled, galvanized and pre-painted steel coil imports from China and South Korea in December after imposing antidumping duties on HRC imports from China, India, Japan and Russia in October.
“Competition in the market is very strong, while the market can be described as very poor and unstable, with a very unsatisfactory outlook,” Irepas said.
Platts, part of S&P Global Commodity Insights, assessed Turkish HRC at $550/mt ex-works on Jan. 10, down 22.5% since the start of 2024.
IREPAS Short Range Outlook: January 2025
Pressure still rising in global longs market, some answers expected after January 20
The pressure in the global long steel products market is increasing as there is no positive news from China yet, while everywhere there is weak demand, market protection and excess capacity. Some questions about the future are expected to receive answers after Trump’s inauguration on January 20
Still no positive news heard from China
Chinese export data for November 2024 showed that China was on its way to a record year in steel exports. The economic news coming from China is less than encouraging and there is no anticipation of any resurgence in its domestic demand for long steel products in 2025. In fact, it is puzzling how Chinese steel users still manage to consume 900 million mt of steel annually.
Global markets face economic strains, inflationary pressures and trade measures
The global economy faces significant challenges amid uncertainties over US trade policy before the new administration takes office. The proposed tariffs, including a 25 percent duty on imports from Canada and Mexico, could disrupt supply chains, raise costs and increase global economic strains. Rising borrowing costs could further burden industries like construction, which are already struggling with low demand and inflationary pressures. While some importing countries who are already subject to Section 232 tariffs may benefit from a more level playing field in the US, the proposed tariffs may also increase costs for domestic construction. These costs impact businesses, especially in capital-intensive industries like construction and could slow economic growth further, thus adversely affecting steel demand in general.
Could actions by Trump prove to be counter-productive?
In the US, after Trump becomes president again, mass deportations of undocumented workers could create labour shortages, particularly in construction, driving up costs and slowing growth. Domestic mills, like Commercial Metals, report losses due to domestic competition with high production capacities recently added by all domestic mills and with more capacity increases expected. While rebuilding after the Los Angeles fires may eventually boost activity, this may still be years away.
Europe still experiencing negative growth, to issue new protective measures
Europe is still experiencing negative growth. The European Union is anticipated to announce a revision of its protective measures on April 1. Turkey and India have also announced market protection measures.
Unpredictable period with low visibility ahead: what will China do?
Although market observers are expecting some answers to their questions to be made clear after January 20, the fact is that we are probably entering a very unpredictable period with low visibility. That said, there is still hope that after its New Year holiday China may repeat what it did back in 2016, but we need to wait for another month to find out.
Very strong competition in very poor market, with quite unsatisfactory outlook
Competition in the market is very strong, while the market can be described as very poor and unstable, with a very unsatisfactory outlook.
Longs market enters holidays, trade challenges loom: Irepas
The global long steel market has entered the holiday season, with significant business activity expected to resume only after 13 January.
Chinese export pressure on global markets, Europe’s steel sector challenges due to high energy costs and weak demand, which has already led to shutdowns, and potential policy shifts in the US are further adding to uncertainty, Kallanish notes from the International Rebar Exporters and Producers Association (Irepas) December outlook.
“Under these circumstances, the situation in the global longs market, where competition remains very tough and more local than global, may be described as unstable and complicated with a difficult, unpredictable outlook,” Irepas forecasts.
Irepas suggests Chinese steel exporters may not have full export order books for the first quarter of 2025 as overseas demand and prices continue to decline. Therefore, “steel prices in the international markets, except in the US, will suffer going forward,” it adds.
Chinese stimulus measures are expected to have a limited impact on limiting steel export volumes in the short term. Domestic prices in China remain low, while production cuts are unlikely, as “Chinese Premier Xi Jinping has pledged that China will meet its ambitious GDP growth target of 5% this year and remain the engine of global economic expansion, and so no production cuts would be anticipated,” Irepas explains.
EU producers are squeezed between weak demand and high costs, limiting their ability to reduce prices while competing with imports. Energy prices in Europe have surged to 2022 levels, prompting mills to temporarily halt liquid steel output or reduce production hours to control supply. “Usually, this would push prices up, but in the current low season, we have to wait and see what happens,” Irepas notes, adding: “It is a good sign that prices have not slid down any further [in the EU].”
In the US, a “not-so-pleasant winter” is expected. “US domestic mills have been keeping prices low and are still offering discounts on already low prices,” Irepas says. “On the other hand, US domestic scrap pricing for December is expected to be down, for the first time in two decades.”
Although interest rates have slightly eased, they remain high for investments. The steel trade may soon become more difficult due to looming additional duties proposed by the new US administration. These duties could trigger retaliatory measures from other countries, further complicating global long steel trade.
Elina Virchenko UAE
IREPAS Short Range Outlook: December 2024
The International Rebar Exporters and Producers Association (IREPAS) has published a Short Range Outlook for December 2024, offering an analysis of global market dynamics in the steel and rebar industries.
Global longs market enters holiday season, but deep uncertainties lie ahead next year
The global long steel products market has mostly entered the holiday period. In many markets, business will start moving only after January 13. Many uncertain factors lie ahead for the post-holiday period, including the situation regarding Chinese exports, the actions likely to be taken by the new US administration and the difficulties faced by the steel industry in Europe.
Chinese stimulus measures so far not expected to have huge impact on exports
In the short term, the Asian markets are speculating on the positive sentiment from China, but it is hard to see how it will convert into real upward movement. It seems the Chinese government is going to make another attempt to increase liquidity to stimulate domestic demand. However, domestic prices are still very low in China and so the potential short-term impact on exporters will probably be limited and they will not change current export volumes until the Chinese steel industry slows down production. However, Chinese Premier Xi Jinping has pledged that China will meet its ambitious GDP growth target of five percent this year and remain the engine of global economic expansion, and so no production cuts would be anticipated. As a result, steel prices in the international markets, except in the US, will suffer going forward.
What are the prospects for Chinese steel exports in Q1?
The important sectors in the Chinese domestic economy, steel in general, and construction and manufacturing, are all in deflationary mode. Steel exports from China have increased during the fourth quarter. It is yet to be seen if Chinese exporters have already booked export orders for the first quarter. They may not have full export order books as demand and prices from overseas customers have fallen further and quantities are less.
Energy prices in Europe surge to 2022 levels, mills announce shutdowns
In the meantime, energy prices have surged to very high levels again in Europe, levels not seen since 2022, and mills in the region have started announcing shutdowns. Usually, this would push prices up but in the current low season we have to wait and see what happens.
Weak demand in Europe, luckily prices have not fallen even further
The market in Europe is still extremely challenging. Domestic producers are holding prices low to fight against imports and to collect any orders they can. But there is no way for them to reduce their prices further as their costs simply do not allow that. Demand is very weak. Many benders are still accepting long-term projects at price levels which do not correspond to current replacement costs. Mills are taking measures to reduce offers by working shorter hours or stopping liquid steel production for a few months. Nevertheless, it is a good sign that prices have not slid down any further despite the approach of the end of the year.
New US administration may trigger even greater difficulties for global long steel trade
Trade in the global long steel products market may enter a period of even greater difficulties with the change in the US administration. Proposed additional duties may trigger other countries to retaliate and it may soon become more difficult to trade globally.
Difficult winter anticipated for US domestic steel market
US domestic mills have been keeping prices low and are still offering discounts on already low prices. In addition, most US buyers, not trusting import price guarantees, refrain from ordering their usual quantities. Interest rates have eased a bit, but are still on the high side for investments. In short, a not so pleasant winter is expected in the US steel market. On the other hand, US domestic scrap pricing for December is expected to be down, for the first time in two decades.
Market is unstable with difficult and unpredictable outlook
Under these circumstances, the situation in the global longs market, where competition remains very tough and more local than global, may be described as unstable and complicated with a difficult unpredictable outlook.
Source: irepas.com
IREPAS Short Range Outlook : November 2024
Gloomy demand picture prevails in global longs market, but possible bright spots on horizon
The supply and demand balance in the global long steel products market is being impacted strongly by low demand and it is reasonable to expect that, if the US introduces new market protection measures, other countries will follow. There is simply not enough demand in the world for all the steel produced. Despite the overall gloomy scenario of mostly insufficient demand, on the bright side China has continued to announce measures to stimulate its economy, while the incoming Trump administration could take steps towards ending the war in Ukraine and bringing about a ceasefire in the Middle East, which would boost the steel markets.
Chinese exports to continue, impact of stimulus measures remains to be seen
The global long steel products market is looking to find ways to extricate itself from the desperate situation it is in. Unfortunately, exports from many countries, starting with China, are not helping at all. While production in China drops, its consumption declines even more, and so its exports increase. China has introduced stimulus packages and measures to resolve the problems of its weak real estate and construction sectors and excess steel production capacity. In China’s most recent stimulus package, financing of RMB 10 trillion ($1.4 trillion) will be provided to enable local governments in the country swap debts at high interest rates with debts at lower interest rates, which is intended to bolster economic activity nationwide. Nevertheless, the Chinese are on their way towards a record year of exports and will export more this year than the total steel production of the US and Canada combined. It remains to be seen whether this situation will change in 2025 under the impact of the stimuli the government has announced. China may indeed need to take further action, similar to the situation in 2016, and it is best if such action is taken before the Chinese New Year holidays.
US remains bright spot in terms of demand, India to see strong rise in steel consumption
The US remains a consistent source of demand in the world. China’s share of global exports and its trade surplus, meanwhile, have hit a new high. It is not a healthy situation and the US will be taking measures to curb Chinese exports. Looking forward to 2025, it is worth pointing out that worldsteel expects 1.2 percent growth in global steel consumption next year, with a 4.2 percent increase foreseen in developing countries, excluding China, while steel consumption in India is predicted to rise by 8.0 percent and consumption in the developed world is expected to grow by 1.9 percent. In particular, the increase foreseen for India is especially noteworthy.
EU market depressed by low demand, overwhelmed by imports
The EU is suffering from low demand and is overwhelmed by imports. Quotas expire very quickly from the day when they are opened and new exotic suppliers have been finding their way into the EU market.
Outlook for Europe and Germany deteriorates
Europe, and in particular Germany, is in a recession. Finally, all the rules and regulations imposed by the EU and the German government over recent years, combined with great geopolitical uncertainty and stagnating international economies, have hit Europe with full strength. What was expected six months ago is finally reaching the man in the street, who is now feeling that the times of non-existent unemployment are coming to an end. Investments are reduced in all fields of the economy and private spendings are at an all-time low, despite the high salary increases of the last two to three years.
Building industry experiencing a tsunami of empty order books
The building industry is experiencing a tsunami with order books as empty as they were 15 years ago. Unfortunately, no light at the end of the tunnel is anticipated in 2025. Such a consolidation in the cut and bend industry in Germany has never been seen and it seems like this is only the beginning.
All eyes on US after Trump’s re-election
After the recent US election, moves to “get America going again” are expected to be seen. Tariffs are on the table and if equally distributed they may create opportunities for the countries already struggling under the Section 232 duties. However, apart from Mexico, other exempt countries may not receive additional tariffs for their steel. Other products like automobiles, wine, etc., may be affected. China will be the biggest loser in terms of future export opportunities to the US. For this reason, it may be more aggressive in its export strategies without worrying about the global reactions. As for US steel, in the short term, US steel prices will go up with the anticipation of new duties. The easing of interest rates will also stimulate the domestic construction industry. However, the situation may level out by the second quarter next year. Additionally, on the positive side, there are hopes that the new Trump administration will focus on bringing the war in Ukraine to an end, and could also step up efforts to bring about a ceasefire in the Middle East. Such developments would have a huge impact in terms of regional security and provide a strong boost to economies and markets worldwide.
Interest rate cuts offer some hope
On the other hand, interest rate cuts have started in some economies and they may push up commodity prices further if they are continued. In particular, some Europeans are hopeful that business will pick up in 2025.
Markets undergo further fragmentation
There has been a further fragmentation of the markets. Aggressive competition is observed in open markets and fair demand in domestic markets. Competition inside the US is heating up as some products are unable to contribute to fixed costs. Mills in the EU are competing hard with each other to grab every ton available as long as their sales manage to cover their costs. Competition from imports is getting weaker and weaker in the EU as international prices do not attract buyers due to the very small advantage compared to domestic prices and with long lead times making imports too risky.
Unstable and fluctuating global market to continue to face lack of demand
Under these circumstances, the global long steel market can be described as unstable and fluctuating as there is a lack of demand. Unfortunately, the outlook for the market is not so bright, as it still points out to a continuing lack of demand and further fluctuations.
CBAM is step forward but not enough to rebalance global markets, European IREPAS conference attendees say
CBAM, a carbon tariff for all carbon-intensive products imported into the European Union, was passed by the European Commission in December 2022 and its transitional phase began in October 2023.
Starting in October 2023, buyers of goods originating outside the EU must purchase certificates which equal the total emissions in the production of the goods.
There is no limit to the number of certificates that can be purchased to avoid restricting trade.
The cost of these certificates are calculated by the European Commission on a weekly basis according to the average price of the closing EU Emission Trading System (ETS) carbon dioxide (CO2) allowances for each week.
Impact of CBAM
CBAM can help to address imbalances related to European companies who are constrained by carbon taxes attempting to compete with countries who are not subject to any regulatory strictures, Louis Redshaw, Founder of Redshaw Advisors, told IREPAS attendees.
CBAM will help reduce carbon leakage, Redshaw said.
Carbon leakage was described when, for reasons of costs related to climate policies, businesses were to transfer production to other countries with more relaxed emission constraints, in turn resulting in an increase in their total emissions.
By placing a fair price on the carbon emitted during the production of all carbon-intensive products entering Europe, European mills, who currently need to pay for carbon credits equivalent to their carbon emissions, will be on a more equitable basis with importing countries who do not currently have the same taxes in place.
Some European market participants, however, were skeptical about how effective CBAM would be in rebalancing the playing field.
Carbon credits
European companies must buy carbon credits, normally from the government, to produce steel. When a company buys a carbon credit they can generate one ton of CO2 emissions.
The development of carbon credits turned carbon dioxide into a commodity, which could be monetized like any commodity.
Currently, the top 10% of the lowest emitting steel producers in Europe do not pay for carbon credits, while the remaining 90% of European steel producers have to pay varying amounts for carbon credits to offset their carbon emissions.
Pre-CBAM, European domestic mills were burdened by the cost of climate policies which non-EU countries were not, making them uncompetitive.
“CBAM will help to make competition fair. If importers are not taxed similarly to European mills, the European steel industry will die,” Redshaw said.
The greater a producer’s emission, the more they need to pay for carbon credits, thus incentivizing them to invest in decarbonizing processes.
By ensuring all countries importing steel into Europe have to pay similar amount, sustainable goals do not stop EU countries from being competitive or profitable.
Market responses
Many conference attendees felt that CBAM could help support European mills remain competitive when faced with so many economic challenges.
Some non-European exporters who were already providing CBAM certificates to buyers in Europe importing their stock, reported high levels of bureaucracy involved with submitting the correct information quarterly.
“It will help to put a fair price on the carbon emitted. Steel producers in Egypt who export to EU have already been asked to fill in necessary paperwork for CBAM. This is a very bureaucratic procedure and may become a burden in the future for producers,” a producer source from Egypt told Fastmarkets.
“CBAM will help support European mills and global targets towards becoming more sustainable,” a second producer source from Egypt said.
Skepticism
Some sources, especially in Europe, did not think CBAM would either encourage global decarbonization or significantly rebalance global markets.
CBAM has put a cost on carbon, but it is not enough to counter the other factors which have resulted in a lack of balance in the global markets, these sources said.
These factors included foreign country subsidies, lower gas and electricity costs, lower labor costs and lower or no regulations in the construction sector, the sources added.
These more skeptical market participants felt that by just putting a price on ‘carbon’, other key areas which required addressing were not being considered.
“Europe has been affected and limited by its own desire to become carbon efficient and this has been a contributing factor to Europe losing market share of steel production, weakening domestic demand and becoming uncompetitive domestically,” a German trader said.
Europe is currently trying to decarbonize, digitize and remain profitable, sources said. But, at least in the short term, the goal of decarbonizing is at odds with the goal of profitability, Fastmarkets heard.
“European producers don’t just have to deal with the carbon issue, they also have to deal with high energy costs because of high taxation on energy and renewable energy transformation and high energy costs and importing expensive raw materials and finding the money to invest in decarbonizing technology,” a producer source from Spain said.
Whereas there is a lot of pressure from every side to transition to low-carbon environment in Europe, this is not the same in non-EU countries.
In other countries, for example China and Algeria, where the steel industry is buoyed up by subsidies, carbon tariffs like CBAM will not incentivize them to decarbonize.
“China will just pay the increased costs with the massive government subsidies they receive. They will continue to emit just as much carbon and will continue to have far lower costs,” a trader at the conference said during a panel discussion.
“Even with CBAM and all countries importing into Europe having to pay for the cost of their carbon footprint, they still remain more competitive because of cheaper energy costs and cheaper labor costs,” a second producer source from Europe said.
