Turkish mills are likely to suspend production in the coming months due to reduced export opportunities and “… vanishing” domestic consumption, according to the International Rebar Exporters and Producers Association (Irepas).
The US Congress is not going to vote on the new USMCA agreement until after the Democrats take control of the House of Representatives. This means US tariffs will remain at 25% and, most likely, that tariffs on Turkish steel will stay at 50%, according to Irepas. With year-end approaching, meanwhile, US stockists are trying to reduce inventories, which is pressuring prices. Far Eastern prices, on the other hand, are now below the cost of production for Turkish producers.
Steel and scrap markets, which have deteriorated owing to Turkey’s economic slowdown, will “… have to accept” the impact of reduced Turkish demand, Irepas says in its December short-range outlook sent to Kallanish. Iranian exports to Turkey are adding to the pressure on Turkish mills and could result in Turkey implementing trade measures.
Asian steel prices have fallen $50/tonne in less than two months. Available supply cannot be sold profitably. With scrap and iron ore prices also correcting, the final impact on spreads will be seen in the coming weeks. Chinese demand remains the key issue. If it remains good enough to prevent Chinese mills exporting aggressively then spreads will reach an equilibrium at reasonable levels, Irepas says. “The situation in China still gives us enough reason to be optimistic for 2019,” the association adds.
“The ceasefire in the trade war between China and the US can contribute to a steadying of nerves and to reducing volatility in the international markets,” at least for the next 90 days, Irepas says.
The real economy is developing better than many expected. No dramatic hike in interest rates seems likely in developed countries, while oil prices are now lower – these factors are also positive indicators for the steel market.
The association concludes: “The market can be defined as unstable at the current juncture with a less-than-satisfactory outlook due to uncertainty and extreme volatility.”