BOF-based producers are facing severe pressure due mainly to increasing raw material costs, with closures and threats of potential closures in several regions. The only solution may be to slow down and stop inefficient facilities, says the International Rebar Exporters and Producers Association (Irepas) in its monthly market report sent to Kallanish.
Iron ore prices surged 18% in June on strong demand and supply disruptions. Some idling of blast furnace production will mean production shifting toward scrap-based electric arc furnaces, which are extending their order books. The BOF production cuts will help balance supply and demand.
The recent uptick in scrap prices is not expected to be sustainable because fundamentals do not support higher levels, Irepas observes. Pig iron prices have seen a downward adjustment to match low residual scrap, which has not made any real gains. Overall, in the market there is an excess supply of slab, while for billet supply and demand are balanced.
Nevertheless, the summer will likely see some decent demand for scrap, which will mean stable pricing. The iron ore to scrap ratio is at a low point, making scrap looks cheap. Scrap availability in the European market will draw down in summer.
Although US long products demand has not changed, supply has increased, thereby pressuring prices. “Domestic mills face very little pressure from imports, but, ironically, they are racing against each other to offer deals to even small buyers,” Irepas says. “On the other hand, US mills are trying to increase their HRC prices, which were unusually low.” The closure of US Steel’s blast furnace-based mills is a major factor.
Canadian mills are now offering to the US with zero duty and will soon become the largest exporter to the US, Irepas comments.
EU quotas are almost used up for Turkish longs exports, meaning there will be no more Turkish sales to the EU market for a year. “As a result, the supply-and-demand balance will not be in better shape than it is today for the Turkish mills,” the association continues.
The EU market is unusually very quiet for this time of year. EU mills’ attempts to raise prices have been in vain. However, due to higher scrap they have not been forced to reduce prices and consequently have very good profit margins.