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| Long Steel |
Despite continued pressure from China, the world's largest steel producer, and the ongoing real estate downturn in major developed markets and China, the global long steel market has not yet bottomed out. Supply continues to outstrip demand, according to a recent analysis.
The International Rebar Producers and Exporters Association (IREPAS) released its "June 2024 Short-Term Outlook for the Global Long Steel Market" report, highlighting several factors contributing to the ongoing uncertainty. These include a global construction slowdown, overproduction in emerging markets such as China, geopolitical conflicts such as the Russia-Ukraine and Israel-Palestine wars, stricter carbon regulations in developed countries, and increased protectionism in emerging markets.
Currently, global long steel supply exceeds demand, but this is primarily due to severe downturns in the construction sectors of major countries rather than an overall increase in production.
Regionally, China is experiencing a continued decline in steel prices due to the ongoing property slump, with prices of key commodities such as iron ore also falling. Despite recent announcements by the Chinese government to tighten energy efficiency and carbon emission regulations for the steel industry, exports from China are expected to remain depressed until after the rainy season. Although the Chinese government announced a ban on illegal steel exports in May, exports increased significantly, indicating that these regulatory measures may not produce immediate results.
In the United States, demand for long steel remains relatively strong, driven by the Biden administration's infrastructure investments, renewable energy projects and commercial construction. However, U.S. companies have ample production capacity, and with the Biden administration imposing higher tariffs on Chinese steel and tightening import regulations, prices are expected to remain relatively high compared to other regions.
In the EU, the prolonged downturn in construction due to high interest rates, inflation and labor shortages continues to depress demand for long steel. While imports have decreased due to the extension of safeguard measures and the carbon border adjustment mechanism (CBAM), the severe economic downturn in member countries is expected to keep both demand and prices weak for the time being.
In Turkey, domestic demand remains relatively robust due to reconstruction projects following a major earthquake in the southeast, but overall demand is sluggish due to weak demand in key export markets such as the EU and the U.S. In addition, the influx of cheap Chinese imports and increased competition from expanded production capacity in the GCC region are eroding steelmakers' profitability. The local steel industry is concerned that without an improvement in EU demand, the influx of cheap imports from China and the GCC could lead to a reduction in long steel production.
In Korea and Japan, high interest rates and uncertainties in the bond market are leading to a slump in the private housing market, resulting in weak demand and prices for long steel. In Latin American countries, long steel demand and prices are also weak due to sluggish public construction projects amid deteriorating fiscal conditions, and production is declining due to the market penetration of cheap Chinese imports.
Conversely, in India, ASEAN and the MENA region, long steel demand is steadily increasing due to continued manufacturing growth, energy transition and infrastructure expansion, including oil and gas and desalination projects. However, steelmakers in these regions are significantly expanding their production capacity, and the influx of cheap imports due to Chinese push-out exports and Russian circumvention exports is keeping long steel prices relatively weak.
As global demand for long steel remains weak, major developed countries are tightening carbon regulations and emerging markets, particularly in Latin America, are increasing import tariffs on Chinese steel, leading to a contraction in long steel trade.
Recently, Canada has also been considering the introduction of CBAM, and it appears that countries expected to lead global steel consumption in the future, such as India, ASEAN and MENA, are planning to tighten steel import regulations.
IREPAS stated, "Due to the global construction downturn, long steel demand remains uncertain. As exports from China continue to be squeezed and international scrap prices do not drop significantly, long steel producers in most countries are seeing margins close to zero. As major developed countries tighten scrap export regulations and carbon regulations such as CBAM to protect their domestic steelmakers, and emerging markets increase import tariffs, trade conflicts related to steel, including long steel, are expected to intensify."
The report also states, "With economic downturns in major countries and intensifying geopolitical conflicts such as the Russia-Ukraine and Israel-Palestine wars, international long steel trade is likely to decline and become more regionalized. In the future, the global long steel market is expected to see a decline in international trade and an expansion of regional trade due to stronger containment measures against China by major countries."
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