EU LONG STEEL OUTLOOK: Mills expected to raise offers ahead of EU safeguard decision
Long steel prices in EU markets could rise with mills seeking to push offers upward before the announcement of a preliminary decision in Europe’s current import safeguard investigation, market sources told Metal Bulletin on Monday July 2.
The European Commission (EC) is expected to impose preliminary safeguard measures on steel imports early this month and, under World Trade Organization rules, it should be able to impose final safeguard measures by early next year, according to European steel association Eurofer.
On June 7, Eurofer called for the EC to impose a steel import safeguard quota on a quarterly basis, with a 25% tariff applied to all steel import volumes that exceed the quota.
EU rebar imports rose by 89.2% year-on-year to 978,000 tonnes in the first five months of 2018, according to steel distribution association Eurometal, from 517,000 tonnes previously.
Statistics from Eurofer show that, on a monthly basis, rebar imports peaked at 258,000 tonnes in March 2018, which was up by 143% year-on-year.
But in April, the first month of trading after the safeguarding investigation had been announced, imports rose by just 51.4% year-on-year – and fell by 24.4% month-on-month – to 195,000 tonnes.
Metal Bulletin’s weekly price assessment for domestic rebar in Southern Europe was €475-500 ($555-584) per tonne delivered on June 27. This was up from €475-490 per tonne one week earlier, but offers as high as €510 per tonne delivered had been heard in Spain, market participants said.
“The [domestic ferrous] scrap price is up and there is positive sentiment, while the expected preliminary decision in the EU safeguard case also helps,” one Southern European producer source said.
“Mills are looking to recover some of the price drop that happened over June,” the source added.
A number of Southern European mills have already closed their rolling programmes for July, while many will close in August for maintenance and summer holidays, limiting the availability of rebar.
But the effects of summer production stoppages have reduced in recent years, a distributor said.
In Northern Europe, domestic rebar prices are also expected to rise, with some mills hoping to raise their offers for commodity-grade long material by around €25-30 per tonne for July.
Metal Bulletin’s weekly price assessment for domestic rebar in Northern Europe remained stable at €535-545 per tonne delivered through June.
“Should the EU opt for strict quotas, a tighter market is likely to lead to higher domestic prices for both long and flat [steel] products,” Lee Allen, metals analyst at Metal Bulletin Research (MBR), said.
“But until the measures are applied, or if measures are weaker than expected, European rebar prices will remain under pressure due to their dim prospects in export markets,” he added.
Export prices for Southern Europe-origin rebar remained range-bound in June, with Metal Bulletin’s assessment at €470-480 per tonne fob on June 27.
Demand in the EU rebar export market has been subdued since the United States imposed tariffs under its Section 232 powers on Europe-origin steel imports on June 1.
Metal Bulletin’s latest price assessment for US imported rebar rose to $680-699 per short ton ($750-771 per tonne) cfr port of Houston on June 20, reflecting offers from both Turkey and the EU that were inclusive of all duties.
Prices for imported steel rebar have ticked higher in the US because the supply of cheap Turkish rebar is limited and European exporters are hesitant about competing with Turkey on price, market participants said.
“Turkish export rebar prices rose last week, but exporters will not want to risk letting European material back into the market by raising their prices again,” Allen said. “This should keep a lid on prices for both Europe- and Turkey-origin rebar in the short term.”
Metal Bulletin’s price assessment for Turkish export rebar moved up by $5-10 per tonne week-on-week to $545-560 per tonne fob on June 28.
At the same time, it will be difficult for Italian mills to reduce their prices any further in the coming month, Allen said.
While Italian rebar prices suffered in June, mills only managed to achieve a drop of €5 per tonne in local E3-grade scrap prices during the month.
“Scrap-to-rebar margins at Italian mills are €193 per tonne, which is the worst we at MBR have seen since August 2017, and below the long-term average breakeven margin level of €200 per tonne,” Allen said.
Mesh-quality wire rod prices in both Northern and Southern Europe could face upward pressure in July, with market participants remaining concerned about the potential effects of the European safeguarding case.
“The mills are just sitting and waiting for the safeguard decision,” one distributor in Northern Europe said.
“In the US, after [the imposition of import tariffs under] Section 232, the domestic wire rod price rose by almost €200 above the EU domestic price,” the distributor added, “so prices could rise sharply in the next three weeks, which will kill off the non-integrated wire mesh producers.”