During the 8th Platts/SBB Steel Markets Europe conference held in Brussels on May 21-22, Kim Marti, commercial director of Spain's Celsa International, spoke about the current situation in the long steel products market and gave his view of the outlook for the coming months.
Mr. Marti highlighted that global GDP growth rate forecasts have recently been revised upwards to 3.5 percent for 2012 and 4.1 percent for 2013. While stating that the figures hid significant differences between developed and emerging economies, he said they still provided a positive sign for the long steel business. Meanwhile, he continued, developed countries like Japan, the US and Germany have been posting encouraging figures. The overall European context is still problematic, but the forecast recession for the first half of the year did not materialize, as the better-than-expected performance of Germany dragged the overall EU area to a substantially sideways year-on-year GDP growth trend in the first quarter. Neverthless, global GDP growth will be lower in 2012 than in 2011, he added.
Long products consumption, Mr. Marti said, is showing a stronger pace of growth than the average consumption for steel products overall, increasing its share in total consumption. The outlook is particularly positive for Asia, where demand is expected to be consistent in the long term, but also in the Middle East and North Africa (MENA) region and in South America (especially Brazil). In other words, "long steel consumption is moving from developed economies to emerging ones," he stressed.
As regards specific long steel products, the Celsa official underlined that in 2011 rebar consumption increased globally by 10 percent year on year, still leading the ranking for long product demand, while wire rod posted an even higher consumption growth rate. The 2012 forecasts for the EU, he said, are not as pessimistic as some may think, with a slight decrease in long steel consumption expected, of about two percent, with a volume of 67 million metric tons.
In this environment, Marti said, the only way for EU long steel producers to keep their businesses in the black is for them to export their output, citing the example of Turkey which ships its rebars to 180 different countries. In particular, in Brazil and South America in general, where rebar consumption per capita is very low, the outlook is very bright. In actual fact, Marti continued, in the last few months the market dynamics have not exactly been in line with predictions: the major advanced economies signal stronger construction activity, while in developing countries (especially China) the real estate market is going through a sluggish phase. Nevertheless, all indicators suggest that long steel consumption will increase almost everywhere except in southern Europe.
During the question-and-answer session, Mr. Marti stated that scrap is putting pressure on European long producers' balance sheets. As for possible new markets for European long steel mills, he said, "Apart from North Africa, which is a consolidated trading partner, we will try to find new opportunities but our challenge is to maintain profitability. I do not think you will see a European mill shipping large volumes to the overseas market. We cannot suddenly become the new Turkey. We have a profitability problem."
Finally, Marti was asked about the recent disappearance of the seasonal factor in some European countries, according to which rebar and scrap prices traditionally rise in March in line with the increased activity of the construction industry. He answered that when new building construction activity picks up, the seasonal factor will return. He went on to say that scrap prices nowadays are very stable and price cycles are limited, just like in the nineties. In his opinion, price fluctuations will be restricted to €10-15/mt and the €50/mt swings observed before the 2008-2009 crisis will not be observed anymore.