- The main themes for October were soaring energy costs, falling iron ore prices, divergence between longs and flats and the US replacing Section 232 tariffs.
- Iron ore prices which have been on an uptrend since late 2018 due to firm Chinese demand, lost 8% value during the month. Improving steel mill margins since China’s steel sector supply-side reform and attempts to eliminate excess steel capacity had previously boosted iron ore demand and prices. Volatility has now returned to the market and Iron ore futures tumbled on uncertainty over steel demand.
- According to World Steel Association, China’s 2021 steel demand now expected -1% instead of +3%.
- Production curbs were instated, reducing electricity consumption and reduced operating hours to deal with the surge in electricity prices and to meet decarbonisation targets.
- US agreed to replace Section 232 steel and aluminium tariffs against the EU bloc with tariff quotas. Long product exports to US have historically been low.
- Flat rolled was weaker in all 3 regions. HRC China (-0.4% MoM), Europe (-10% MoM), USA (-2% MoM). That trend somewhat reversed at the end of October as sentiment improved in north Europe where 30% less steel booked than would be expected as demand from auto sector reduced as production issues from the semiconductor shortage impacting car production.
- Turkey Scrap gained 12% during the month and +14% MoM. Scrap collectors targeted higher prices for October and November shipments. Turkey Central Bank announcement to decrease interest rates pushed up Lira denominated offer prices, raising concerns about end-users ability to continue to absorb these increases.
- Turkey rebar led scrap price increases gaining 10% during the month and 9% MoM and the Rebar-Scrap spread widened out to 237, averaging 229. Domestic rebar demand in Turkey remained strong and Chinese Rebar demand, which constitutes 1/3 of steel demand in China was up on restocking after Golden Week and as the real estate market stabilised post the Evergrande crisis. In November and December typically construction slows down.