The International Rebar Producers and Exporters Association (IREPAS) has released its short range outlook, a lot of which makes for bleak reading.
On the negative side of the coin [is there a positive side?] the global longs market is predicted to weaken further, the international rebar market is weaker now than a month ago and demand has been hit by low confidence. Producers face higher power costs during the hot summer season, there are GDP issues for the European Union and if that's not enough, Chinese imports are still on the up despite the softening of prices due to weak demand.
The report states that there has been an easing of tensions in the Middle East, but the latest media reports tell a different story with Trump referring to the Iranians as 'scum' and seems to be hurtling towards conflict after a fragile peace slowly disintegrates.
Going back to the global longs market, the overall business environment is said to have deteriorated further. Complexities are increasing and while the sector could be approaching 'the bottom of the current cycle', a lot is dependent on a de-escalation of the Iran conflict (which seems unlikely at the time of writing).
On the international rebar market there is continued subdued demand. Supply remains high, however, placing pressure on prices and margins, and while talk of an easing of tensions in the Middle East is mentioned many times, the reality is that things are hotting up again. Some producers have begun lowering production in response to market conditions with a view to improving the supply and demand balance over time.
With demand hit by low confidence it is believed that more Iranian and Russian billet could depress rebar prices which would exert further pressure on the market.
A hot summer means higher power costs for many and this will work against the interests of producers, it is claimed.
The overall geopolitical situation is not good for Europe, which is still struggling to improve its GDP. Energy costs and inflation in the region are rising and, says IREPAS, "we have entered into a new phase regarding EU imports, which will only be observed during the initial days of the new quarterly period and will then be silent for the rest of the quarter."
Despite a gradual decline in output, Chinese steel exports continue to increase, says IREPAS, claiming 'there is nothing positive in the Far East except for the gradual decrease in production in China', but this is not thought likely to change things in the short run.
In the US, data centres are the new holy grail as capacity utilisation stalls at around 81% and domestic mills are announcing increases of US$10 per net ton. The data centres are not all 100% financed or without building permits, claims IREPAS.
Global competition is claimed to be 'extremely tense' and few genuinely free markets remain. Trade flows are shaped by tariffs, quotas and other measures and this has resulted in fragmented markets. Weak demand means strong competition in Europe 'and competition in third-country export markets is even more challenging as suppliers from around the world compete for a shrinking number of open destinations'.
IREPAS states that 'today, there are relatively few genuinely free markets remaining for global steel producers' and for all these reasons, the current state of the market is 'unstable with a very unclear outlook'.
