Tough times await the global long products market - IREPAS

According to the International Association of Manufacturers and Exporters of Valves (IREPAS), in the second half of 2015, the global bar market will face a more difficult situation than in the first half of the year. The deteriorating political and financial situation in some countries of the world economy, along with China's overproduction of steel products, is likely to significantly reduce the profitability of suppliers.

During the last month ended, there was an improvement in iron ore prices and a revival of the scrap market, which led to a decrease in steel production. However, once scrap steel prices begin to decline, Chinese steel mills are increasing steel yields again, raising overcapacity issues during the current month. The fall in demand in the domestic market due to the slowdown in the growth rate of the Chinese economy also contributed to an increase in exports from this country. Exports from China rose nearly 45 percent in the first five months of this year, compared to the previous year. The flooding of the international market with inexpensive long products from China put pressure on prices.

IREPAS noted that low prices have significantly reduced production margins. In order to stay in business, metallurgical companies will be forced to implement massive production cuts. However, Chinese factories are not expected to cut production, at least as long as banks continue to provide them with financing. Surplus in Chinese factories affects profitability and productivity in factories operating in competing countries such as India and Turkey, South Asia and the Middle East. Many EU mills are expected to cut long steel production in the second half of the year.

IREPAS predicts a bearish market for long products in the second half of 2015. The association's forecasts are based on the extreme supply situation, the circumstances of weakening demand and the expected major adjustments in scrap prices. Due to these factors, IREPAS believes that the global long steel market will be challenging in the second half of this year.