Excess supply in the global long products market will likely not improve significantly in the short term according to the International Rebar Producers and Exporters Association (Irepas). The downward trend in pricing however has come to an end provided iron ore stays in the $50-60/tonne range, the association says.

The recent increase in metallics prices has given positive impetus to global longs demand, with North and Central America seen as particular bright spots. The EU economic environment is improving, but the recent strengthening of the euro against the dollar has made Eurozone exports less attractive. The EU is seen as the most stable steel market in the second half of 2015 after 18 month of price stability relative to North America and Asia.

European producers are also seen benefiting from the antidumping investigation against China-origin rebar. This will “… certainly prevent traders and buyers from continuing with new purchases at least for a certain period of time as the investigation creates huge uncertainty,” Irepas says in its May short-range outlook sent to Kallanish.

The upward scrap price trend has helped “… give buyers a certain level of confidence about the future price levels of steel products”, the association continues. This trend “… has also had a positive effect on export markets, boosting demand for finished products. However, all such improvements in demand are offset by the existing overcapacity situation in the global long steel products market.”

Russian steel exporters have been enjoying a significant cost advantage over their Chinese counterparts who are unwilling to “… compete aggressively” with Russia-origin offers, says Irepas. The drop in February and March of China-origin exports has created a “… better atmosphere” in the Americas. “The low ocean freight rates are… a positive condition to help with margins even if slightly, but at the same time constitute evidence of decreasing volumes of transoceanic deals.”

There are questions over the “… sustainability of the positive momentum in the markets” as China’s Purchasing Managers Index does not look positive. That said, China intends to “… drastically” reduce its steel capacity which will bring supply and demand into balance, Irepas observes.

On the scrap side, “… the sharp drop in steel pricing in the US market deters steel imports and seems to be healthy for the scrap market going forward as it adds to the competitiveness of domestic producers,” Irepas states. “US domestic demand for scrap remains fairly good and the demand outlook for scrap in the country is decent.”