The consensus view from MEPS research, is that a large degree of uncertainty persists in the global steel market. It is becoming increasingly evident that North American and European steel buyers are hesitant about making purchasing decisions.
US authorities introduced a 25 percent tariff on steel imports last month. Concerns regarding the final outcome of the Section 232 probe have developed around the world. These, particularly, relate to the potential for the diversion of trade into the EU. As a result, the European Commission is investigating the possibility of introducing further trade legislation. The likelihood is that existing and additional trade protection measures would lead to a decrease in imports and, potentially, cause supply shortages, in the US and EU.
It is widely perceived that protectionism restricts the choices for the customer. These measures are designed to safeguard the strategic interests of a steel-producing nation. Customers would, arguably, be denied the opportunity to procure material at competitive prices.
In North America, regional mills have been given relatively free rein to escalate flat products’ selling values, in recent months – with minimal resistance from buyers. Amid a healthy trading environment, many US stockists remark that availability of material has tightened. At the end of this month’s research period, it was increasingly apparent that the positive pricing momentum, within the region, is stalling. MEPS believes that US flat product transaction values are nearing the peak of the current cycle. It is likely that US prices have now increased to levels at which imports are competitive, once again. Furthermore, local steelmakers intend to raise production. This should prevent shortages from developing.
Despite existing and potential new trade measures, MEPS predicts that global steel prices will come under negative pressure, in the second half of 2018.