Protectionism fails to balance the steel market
Low US steel prices, especially hot rolled steel (HRC), show that protectionist measures imposed by President Trump have not worked, Irepas said in its latest forecast for the near term.
Demand for metal products in the US remained unchanged, while domestic supplies are increasing, which puts pressure on prices. The US hot rolled steel price has been declining since April, and the weekly HRC estimate in the US Midwest fell to US $ 539.50 per tonne EXW on July 9 from US $ 704.25 four months ago.
"American steel mills face very little pressure from imports, but ironically they compete with each other, offering discounts to even small buyers," the association said in a report.
US Steel was forced to suspend two blast furnaces in the US last month due to oversaturation. But even the removal of capacity from the market does not appear to have pushed prices up, and steelmakers NLMK, US Steel, Algoma Steel, Nucor and ArcelorMittal have announced a $ 40 /t increase this week.
Irepas expects Canada to overtake Mexico as the largest US steel exporter as it is currently exempted from import duties. Mexico tends to be more cautious about future anti-dumping measures, a concern that seems legitimate as the US imposed tariffs on structural steel imports from Mexico and China this week.
Irepas expects electric arc furnaces to expand their order books as iron ore prices rise and blast furnace production declines. As a result, the demand for scrap metal is expected to remain stable, but despite this, the increase in scrap prices will not last long.
American markets are not alone in feeling the pressure from a global steel glut, as the glut is exacerbated by an unusually quiet European market, primarily under pressure from declining manufacturing activity.
Attempts by the European steel association Eurofer to strengthen guarantees for European imports will negatively affect the steel industry, the processing industry, isolating trading partners, despite the fact that European steel mills have not been forced to reduce prices and have high profit margins.
“Competition in regional markets is intense, but due to protectionism, competition from deep sea sources is much less. Lack of consumption leads to increased competition. Exporters have very few markets left, ”the report says.
The Association stated that, with limited import opportunities in Europe and a weak domestic market, Turkey will continue to face protectionist pressure.
But while the European and American markets are suffering, demand in China is growing and exports are falling.
“There is no risk of exporting metal products from China, which helps maintain a balance between supply and demand. On the contrary, China is becoming a destination for convenience foods. In the future, we can expect further investments in the electric arc furnace route in China, ”Irepas predicts.
In recent months, China has made much more commitments to downsize its steel capacity. Reduced steel production in Tangshan due to environmental concerns last month spurred sentiment and increased prices.