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Home > MEPS Steel News - 30.10.2018

Protection Measures Support Steel Prices but Disrupt Trade Flows


Supply options for large exporters of steel, such as those in China and Russia, are becoming limited, owing to existing trade barriers, implemented by many authorities around the world. As a consequence, steelmakers are scouring the globe, for new destinations, in which to sell their excess capacity.

From MEPS’ research, in October, many Chinese steel market participants report that they are finding it increasingly problematic to sell into the neighbouring Southeast Asian market. This is due to the emergence of local mills and strong competition, from Russian, Indian and Iranian steel manufacturers.

As a consequence, Chinese producers are actively seeking new business relationships, in the Middle East and Africa, where demand of steel is in excess of local production capacity. Chinese mills should be confident of increasing their market share, at the expense of regional suppliers.

Protectionist measures and trade cases, in many parts of the world, are disrupting traditional flows of material – affecting the ethos of free trade.

In the US, the Section 232 legislation has given local steelmakers the opportunity to escalate selling values with little resistance, in the past twelve months. Although figures are softening, from their recent highs. Cross-border trade across North America has been disrupted by the measures. The United States-Mexico-Canada Agreement (USMCA) is expected to result in the removal of steel tariffs, and replacement by quotas, in the latter part of this year.

Following the introduction of temporary safeguarding measures, European steelmakers were able to solidify domestic steel selling values, during the traditionally slow summer period. Weakening sentiment has resulted in a reversal of the upward price trend, in recent weeks. Nonetheless, it is reported that a vast proportion of the steel quotas are being under-utilised. Local buyers appear to be procuring material from domestic sources rather than from third-party countries.

MEPS predicts that the current level of trade protection afforded to steel mills, in several regions of the world, will help them maintain prices, at their relatively elevated level, for the foreseeable future.

 

 

Source: MEPS - International Steel Review - October 2018 Edition

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