The middle East market of long products is on the decline. Quotes for structural steel in the region decrease from the middle of August and for the past month and a half, dropped more than $50 per ton.
Analysts point out several reasons for the falling prices. First of all, it is the lack of demand for steel products. Turkish construction sector has become a victim of the European crisis, which led to a sharp drop in exports of Turkish goods to the EU countries. In the countries of the Eastern Mediterranean and North Africa a negative impact on the economy is having political instability. The Egyptian government does not adopt promised before the election in the spring of this year the housing construction program. In Saudi Arabia, the lion's share of projects funded by the government and so they use products from local plants or plants from other countries of the cooperation Council of Persian Gulf States.
In September, significant amounts of Turkish and Ukrainian rebar was delivered to Iraq. This allowed the suppliers to keep the quotes at the level of $590-600 / t EXW and $585-595 per ton FOB respectively. However, in early October, the demand in this area declined as Iraqi distributors have enough stock of goods.
Finally, a significant impact on the regional market in recent years have suppliers of cheap products from unconventional sources. In August, it was southern Europe the company benefited from the depreciation of the Euro against the dollar, and in September they were replaced by the Chinese. The appearance in the sale of Chinese rebar and wire rod cost $550-560 / t CFR in the Persian Gulf and the Mediterranean literally paralyzed the market. Some regional companies took advantage of this opportunity, others were quick to put pressure on traditional suppliers from Turkey and the CIS.
During the first weeks of October the Chinese company was absent from the market, celebrating the anniversary of the founding of the PRC. But it almost didn't change anything. Transactions were few, as the majority of consumers expected the return of the Chinese. Exporters had to make more concessions.
In Turkey, domestic rebar prices by the end of the first week of October fell to about $580-590 per ton EXW when demand is low. Export deliveries were carried out at the level of $575-590 per ton FOB, but the counter requests were received at the rate of $560-570 / t FOB. According to traders, in recent days some companies are willing to enter into transactions for the sale of large quantities of rebar at $570 per ton FOB. Ukrainian production is not yet falling below $580 per ton FOB, but who want to buy it on such terms is getting smaller.
Apparently, in the near future and long steel products in the Middle East will continue to become cheaper. The situation with the demand, apparently, in the foreseeable future will not improve, moreover, in the region continue to fall in the price of scrap and billet. The Chinese company, in late September, however, attempted to increase its prices by no less than $20 per ton, however, consumers did not seem ready for such a step. Among the participants of the market is dominated by negative expectations, and change them in the near future will be very difficult.
According to some experts, stop the expansion of Chinese steelmakers in the middle East market will be possible only by administrative methods. At least the Egyptian Industrialists are going to appeal to the government requesting the erection of barriers to imports from China. According to them, the current capacity of the national metallurgy, and so excessive, amounting to about 9 million tonnes of steel per year when the need for 6 million tons, and the emergence of Chinese can completely undermine the position of the industry.
Victor Tarnavsky
Rusmet.ru