The last session of the SteelOrbis Spring '10 Conference & 62nd IREPAS Meeting, held in Budapest on June 6-8, featured committee reports of billet producers, rebar and wire rod producers, traders and raw materials suppliers. The common conclusion arrived at by each committee was that oversupply is currently the main problem facing the steel industry and that production should be aligned to low demand in order to maintain prices at acceptable levels.
The chairman of the raw materials committee, managing director of Helveco Intertrade SA, Ioannis Meimaroglu, said that the raw materials committee agreed that the euro-dollar exchange rate has been affecting the raw materials trade negatively, adding that the difference between scrap selling prices and material replacement costs is not reasonable, since the first does not generate the second, and stating that scrap prices are not realistic at current levels. The raw materials committee also declared that they would support a cut in output by finished steel producers, as it would have a positive effect on both scrap prices and finished steel prices.
Qatar Steel's marketing manager Mohammed Al-Saadi, chairman of the rebar and wire rod producers' committee, said that their committee agreed that European long steel producers are suffering from low demand all across Europe, particularly in long steel producing countries like Spain and Italy. Low demand, coupled with high production costs due to higher iron ore and scrap prices, is putting pressure on prices. Mr. Al-Saadi also said that in the Middle East rebar and billet prices are now at the same levels. The committee declared that in the second quarter of 2010 most producers cut their outputs as compared to the first quarter of the year. Considering expectations that iron ore prices will further increase in the third quarter and considering current demand levels, Al-Saadi said that oversupply remains the main problem and it can only be solved by further production cuts in the short term.
Chairman of the billet producers' committee Ugur Dalbeler, also chairman of IREPAS, said that in the first quarter of this year rebar output rose by 35 percent as compared to the corresponding period of 2009. Mr. Dalbeler also said that, while order books are full for July, orders after July remain uncertain for now. Stating that the crisis had taught producers how to adjust their production to demand levels, Dalbeler said that producers will continue adjusting their capacity usage in line with sales. The IREPAS chairman concluded by saying he expects activity in the industry to revive very soon.
The traders' committee, chaired by Michael Setterdahl from Nucor Trading, remarked that demand is low in the market in general, resulting in a situation of oversupply. Mr. Setterdahl said that, China, with its rebar output of 350,000 metric tons per day mostly via consumption of iron ore, is pushing production costs up, as raw material suppliers keep on raising prices backed by high demand, and this situation has an adverse effect on the global steel industry since it limits profit margins dramatically. The traders' committee also expressed its concerns regarding credit availability, not only for producers or traders, but most of all for steel users, who are the main source of demand.