The global long steel products market has weakened slightly: demand remains stable but low, while rebar prices are moving in line with scrap prices
Overall, the global long steel products market has weakened slightly. Demand has remained broadly stable over the past couple of months, but is still weak. Rebar prices, meanwhile, are fluctuating in line with changes in scrap prices. Higher scrap prices have boosted demand for steel billets from Far Eastern countries. Governments may increase infrastructure investment amid the construction of data centers for artificial intelligence and rising electricity needs. This process is already underway in the United States and could soon begin in other regions as well.
China signals its intention to curb supply, but doubts remain
Excess production capacity remains a major concern. It appears that the Chinese authorities want to restrict supply, but it is unclear whether they will succeed. There are no signs yet of either stronger demand or a slowdown in Chinese exports. Market participants hope that China will take measures next year similar to those introduced in 2016.
Uncertainty is the main risk for all market participants
Uncertainty remains the main risk for all market participants and is likely to persist for the foreseeable future. High interest rates in the West are an additional concern, as they weigh on demand prospects.
European steelmakers face rapidly rising costs amid weak demand
The European steel market remains challenging: demand is weak and competition among local producers is fierce. The reduction in safeguard quotas and the introduction of the CBAM have so far provided only limited support for prices. European mills continue to compete for sales volumes rather than protect profitability. Meanwhile, conditions are changing rapidly as energy costs surge. Over the past three months, natural gas prices in the EU have risen by around 150%. Gas futures at the Dutch TTF hub are now trading above 100 euros per MWh, compared with less than 40 euros three months ago. Electricity has also become significantly more expensive. Since August, rising gas and electricity prices have increased the direct costs of steelmaking and rolling by more than 110 euros per tonne, and they could climb further.
At current prices for finished steel products, European production is becoming less and less profitable. Steelmakers must choose whether to pass the additional costs on to buyers, accept further margin compression, or cut output. At the same time, reduced import quotas and the CBAM are limiting alternative sources of supply. Despite weak demand, the combination of rising production costs and restricted imports could significantly alter Europe’s supply-demand balance.
The latest price increase was driven primarily by rising costs, not demand. Higher logistics costs have added to the pressure, partly because water levels in European rivers are exceptionally low, although this has not caused any major supply chain disruptions.
Germany’s construction industry is still waiting for state-funded infrastructure projects to get underway. Private investment remains subdued because of continued uncertainty.
Steel prices in Europe are likely to continue rising in the first quarter of 2027 if energy costs remain at current levels or increase. Production cuts will add to price pressure even if demand does not grow.
The current situation has become unsustainable and requires immediate action.
Overall, the supply-demand balance has improved slightly
In other regions of the world, production costs are not as high as in Europe, where they are driven primarily by EU climate measures. Excess supply does not appear to be as acute a problem. Overall, the supply-demand balance has probably improved slightly.
Demand in the United States is relatively stable, but growth is concentrated in certain segments
Demand in the United States is relatively stable, but high import duties and trade restrictions have significantly curtailed opportunities for overseas suppliers, while domestic mills are operating in a more protected market. International traders’ margins in the United States remain under severe pressure. The few major areas of growth include construction of AI data centers, energy, and some infrastructure projects. Activity in residential and commercial construction remains low, partly because of the high cost of financing. Steel demand trends vary by product and industry. Overall, the global supply-demand imbalance remains a serious problem. It may soon affect the United States as well, particularly the rebar market.
Electric steelmaking costs are rising, giving integrated mills an advantage
The cost of producing steel in electric arc furnaces is rising steadily because of electricity shortages and insufficient transmission line capacity. This is likely to benefit integrated producers that use coal.
India and some Southeast Asian countries remain relatively strong markets
On the international market, India and some Southeast Asian countries continue to perform relatively well. The region has potential to improve in 2027, although the recovery is likely to be gradual and uneven. The absence of bombings in the Middle East is another positive factor.
Competition on the global market remains fierce and varies widely by region
Competition on the global market remains, as always, extremely fierce and varies considerably from region to region. Excess capacity, particularly in Asia, trade barriers, and limited access to major import markets are forcing exporters to compete more aggressively for fewer supply opportunities. Prices in Europe are expected to rise further in the first quarter of 2027. The North American market remains stable, with capacity utilization at 80%. However, competition among local producers could intensify over the next two to three years because of excess supply and uncertainty over consumption forecasts.
The market is stable in Europe for now, but volatile in other regions
Under the current conditions, the European market is likely to remain stable for another few weeks. The situation in other regions is volatile.
The outlook for next quarter is challenging: scrap supplies will shrink as exports from the United States and the EU decline
The market outlook for next quarter is challenging, with demand expected to remain weak. Prices are likely to rise because of higher energy costs and a scrap shortage. The United States, one of the two largest scrap-exporting regions, increasingly needs scrap for domestic consumption. Europe is also increasing its use of scrap, leaving less material available for export and putting further upward pressure on prices. Demand prospects remain stable, but unsatisfactory.
irepas.com
