With the improving GDP of key economies, the demand outlook for steel is quite optimistic in 2018 as compared to previous years. The steel demand in Europe and U.S. is quite stable while other economies are also performing quite well. However, this positive demand will not be weighed down by excessive steel supply from China this month. This is because China is holding back its offers in the export market amid upcoming Chinese New Year holidays and improved domestic demand. Let us look at the short term outlook for steel in major economies.
Supply-demand balance for long products; supply side required to be cautious
While the supply and demand balance in the global long steel products market still looks good, the supply side is gearing up. While supply pressure is not expected to create big problems in the short run it may be an issue in the long run if demand is not able to match up the supply. However, Chinese manufacturers have realised that adding capacity won’t do any good till there is sufficient demand, as otherwise excess supply and slack in demand leads to losses.
Uncertainty awaits the US steel market
Steel demand in the U.S. has been steady over past few months with the potential to improve in future months. However the supply is limited due to pending decision on section 232. The Section 232 probes into steel and aluminium imports in to the country and was launched in Apr’17. The purpose of the investigation is to determine whether or not the imports pose a threat to the country’s national security. As the final decision on the same is awaited, buyers are holding imports giving domestic mills the opportunity to increase their prices. The situation is likely to change depending on the results of section 232.
Sluggish prices in Europe Union (EU)
Rebar prices in EU have registered a fall due to weakened steel prices in Turkey which is its key steel exporter and also due to strengthening of Euro against dollar which made imports cheaper. However, the demand outlook for steel in EU is quite optimistic in short and medium term, giving confidence to both domestic and exporting long steel producers.
Reasonable demand and positive sentiment in major Latin American countries
Demand in the major Latin American countries is reasonable, accompanied by positive sentiment against the backdrop of optimistic forecast for 2018. Price adjustments may be seen in the very short term but will not affect the spread levels. Steel prices are expected to trend upwards after the Chinese New Year holiday.
Scrap demand to remain at good levels in EU and U.S. while prices likely to remain elevated
The much awaited correction in ferrous scrap was seen in Jan’18 despite demand being fairly stable. Good demand in the steel sector is likely to keep scrap demand at decent levels for the coming month in the European and U.S. markets amid subdued influx of imports. The weaker U.S. dollar coupled with the increased balancing of world trade is likely to keep scrap a bit at elevated levels against previous years.
Outlook for Q1 CY18 is satisfactory
The market of major economies seems to be quite stable and is likely to remain the same till Mar’18, with few exceptions. Thus, while steel demand will remain optimistic, prices are also likely to remain more or less stable, thus making outlook for quarter that will end on Mar’18, quite satisfactory.
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