Third quarter ‘worst’ for longs, markets reopen: Irepas

The third quarter could be the worst in 2020 for long products, but raw materials should perform strongly thanks to markets rebuilding and government stimuli adding a push, says the International Rebar Exporters and Producers Association (Irepas).

Chinese demand is helping the steel industry rebound, with the country importing significant semi-finished steel and hot rolled coil in recent months to support its huge backlog of demand after Covid-19 restrictions loosened. However, there is more competition in the global market at the lowest price.

China typically produces 50% of the world’s steel, but that is now approaching 65% because of the downturn in the rest of the world and increased production in China. Strong domestic demand is preventing Chinese exports. It is now rather “…cheap steel from Europe” that is searching for destinations, Irepas observes.

Global longs demand is not as bad as widely reported, but mills operating at more than 60% of capacity utilisation are nevertheless “…blessed,” Irepas says in its latest short-range outlook seen by Kallanish. “Of course, those operating under 50% are in trouble.”

The Covid-19-driven backlog of building applications and delays in investments will reduce demand for all steel products. But, so far, long products have not been hit as hard as flats.

Stimulus activities are buoying up markets, as the rest of the world gradually reopens from lockdowns. Manufacturing and construction activity that was previously halted in many places is gradually and simultaneously boosting demand.

EU market sentiment is far more negative than pre Covid-19. Private investments may be put on hold but the public sector could use construction to stimulate the economy and inject money into it.

“Reopening means utilisation rates have been picking up from bottom levels,” Irepas says. “Scrap inventories were depleted in May as industry closures meant low scrap availability. June buying surpassed the levels for a normal month as scrap needed to be restocked.”