By Paul Ploumis 08 Jul 2015 Last updated at 02:09:12 GMT
ALBANY (Scrap Monster): According to the International Rebar Producers and Exporters Association (IREPAS), the global long products market is set to face more challenges during the second half of 2015, when compared with H1. The worsening political and financial issues with world economies along with Chinese oversupply are likely to trim the margins of suppliers.
The strength in iron ore prices and revival of scrap market had resulted in less production of steel production during last month. However, with scrap prices cooling off, Chinese steel mills have raised production, raising concerns of excess production during this month. The drop in domestic demand has also resulted in increased exports out of China. The exports from the country have surged higher by nearly 45% during the initial five-month period of the year, when matched with the previous year. Flooding of low priced billets from China has created downward pressure in international market.
IREPAS noted that low prices have reduced margins substantially. In order to remain in business, mills will be forced to implement massive production cuts. However, Chinese mills are not expected to cut down production as long as banks continue to provide finance. The surplus production by Chinese mills is likely to affect margins and productivity at mills in competing producing countries such as India, South Asia, MENA and Turkey. EU mills are expected to cut production during the second half of the year.
Irepas forecasts bearish market condition for long products during H2 2015. The forecasts are based on extreme supply situation, weakening demand circumstances and anticipated major adjustments in scrap prices.