Steel prices could rise again “… for no apparent reason,” as the market is driven more by speculation and sentiment than by fundamentals, says the International Rebar Exporters and Producers Association (Irepas).

The current major issue is deferral by consumers of purchases. This is causing the market to overshoot on the negative side, as it did at the end of 2015 and beginning of 2016, with high volatility in semi-finished product and scrap prices. “Going forward, we will have to get used to a higher degree of volatility in the international markets amid fluctuations in Chinese steelmaking production,” Irepas says in its June short-range outlook seen by Kallanish.

After a month of low business volumes in international trade, market participants are again present in numbers at which business can restart. With the higher global prices in March and April came increased supply which now needs to be absorbed. “As the number of contracts concluded during the past five weeks were not many, competition is expected to be very strong in the coming weeks,” Irepas observes.

Huge losses have recently been observed in the steel futures market. This market was supposed to reduce volatility but instead caused the opposite during an 80-day spread, which is less than the typical buy/produce/ship cycle. Such losses may discourage similar speculation in future, Irepas suggests.

“China in the first place has to continue with new investment plans to consume what they produce,” the association comments. “That said, the end of May figures show that the supply surplus is still increasing. Accordingly, the rest of the world has to take necessary measures to stop excessive Chinese supply; otherwise it looks like the Chinese will not be able to reduce their supply voluntarily.”

“There has not been any significant change in demand in the global long steel products market,” Irepas says. “User consumption has not changed all year except for the usual seasonal ups and downs.” In some regions, such as the US and EU, however, there is low availability of certain products due to protectionist measures.