At the SteelOrbis Spring 2013 Conference & 68th IREPAS Meeting held on March 3-5 in Doha, Gianpiero Repole, commercial director of Liberty Group assessed the current situation in long steel markets and shared his opinions regarding the market outlook with SteelOrbis.
Liberty Group is an international steel and minerals group, operating from its three financial hubs in London, Dubai and Singapore with a network of offices spread across 30 countries around the world. The group has interests in a wide range of mining and steel production assets in Asia, Middle East, Africa and Europe.
Liberty Group's annual turnover is $5 billion, covering over seven million metric tonnes of steel and raw materials, employing over 2,000 people globally. Total production capacity currently adds up to two million mt of liquid steel and three million mt of finished products. This is scheduled to increase to five million mt by 2015.
The steel market had slowed down at the end of 2012. How do you see the market situation in the beginning of 2013?
For long steel products, the beginning of the year was much of a rebound; January and February were quite nice. We enjoyed higher prices as compared to December 2012. Because in December I believe that a lot of companies either focused on cleaning up books, or they were worried about a possible correction at beginning of the following year, so prices were excessively low. Then, things got better in January and February as there was a perceived shortage as many Saudis had not bought cargoes and other were delayed due to ice in many ports.
I think March will be a very difficult month with not that much volume or not that much volatility either. In April a prediction, scrap is going to see correction more than billet. Maybe scrap will go to somewhere around $380-385/mt CFR Turkey level from the US and billet price will see correction about $5-10/mt, because the billet price did not go up as much as scrap did and $400/mt is not really sustainable for a long period of time. Steel market is undecided, but nothing good will come out of this. I think Russians will panic and drop the price to get volumes out and Turks will be squeezed unless Americans relent and release scrap prices.
It's difficult to foresee after April, but 2013 will be a very difficult year, whether you're an iron ore-based mill, since if iron ore price stays at around $130-145/mt it's very difficult to remain competitive with billet price at this level. And for a scrap dependent mill, when billet price is around $540-550/mt FOB and scrap at $390-395/mt CFR Turkey, it would not work. I cannot imagine anyone cutting its capacity in a real way, though some may reduce their capacity a little here and there. So we are not going to see any major relief in the price structure. In March though the freight rates are low enough and Turkish mills were shipping to Far East, Thailand and Indonesia, but volumes were not very large.
What is the role of China these days?
In long products, I'd say of course for wire rod and rebar there has been rumors of lots of sales, but most of these sales are not delivered, because the market is corrected and Chinese decided not to deliver. Some of square bar sales have been shipped, but volumes have remained limited.
But in Far East, they always live in the shadow of this Big Brother [China]. China may move very temperamental, they can do anything in a short period of time. So it's very difficult to have a long term outlook in this market. When China sneezes, all the Far Eastern market does not catch a cold, but they get pneumonia and die. So it's very dangerous.
What are the active markets?
The Middle East is active. And in Far East, Phillipines and Indonesia.
Regarding the situation in Egypt; you know Egypt imposed 6.8 percent duty for rebar and wire rod imports. So do you think Egypt is now out of game?
We have to wait and see. Everything being equal, if local mills increase their domestic prices to absorb that 6.8 percent, then there will not be any difference, one may still able to sell rebar and wire rod to Egypt. So the question is, local mills are likely to capture that, why would they leave that sum on the table, just to keep imports out. I cannot image anything like that. So, soon enough, when local mills increase their prices, we will be able to sell to Egypt again.
And duty per se, unless it's substantial, does not stop people from importing. So you need two things to stop imports, a very high import duty and that local mills to agree to leave some of that duty advantage on the table.
So regarding Egypt, if Egyptian mills have an advantage of $25/mt, they would try to get as much as they can.
