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Domestic demand for recycled steel remains dismal, making exports a necessity. Demand for containerized shipments to the Indian Subcontinent and the Far East has still not returned to pre-Red Sea crisis levels, stifled by elevated shipping costs.

We are starting to see a slight resurgence in demand, stemming predominantly from India and underpinned by relatively strong iron ore prices and, consequentially, higher hot metal prices, which in turn have given the secondary steel sector producing long products in induction and electric arc furnaces (EAFs) a chance to compete with integrated mills for market share going into the second quarter.

In the UK, Tata Steel has now confirmed the closure of Port Talbot’s two blast furnaces by the end of June and the end of September, respectively, and is proceeding with its US$ 1.5 billion investment in an EAF, due online in late 2027. In the interim, the plant will continue to roll slab into hot rolled coil, importing from Tata Steel plants in India and the Netherlands as well as other “strategic suppliers” on the international market.

The new owners of Celsa UK, the country’s only domestic producer of long products, is currently considering a sale of its UK and of some of its Continental asset base. The company is a steady offtaker of recycled steel at present but is falling far short of the necessary demand to generate a healthy domestic market.

As other UK mills are idled or inconsequential, attention shifts to Turkey where the prevailing economic landscape is marked by subdued demand, market volatility and assertive export endeavours originating from Asia, a confluence of factors that compounds existing uncertainties.

It is evident that a significant proportion, perhaps surpassing two-thirds, of Turkey’s EAF capacity lies dormant or is operational only intermittently, likely in response to prevailing conditions. Recent thermal assessments indicate a trend of output reduction, implemented as a countermeasure against artificially suppressed demand, influenced by monetary and fiscal interventions, and the inherent constraints stemming from inflation.

Despite this, the domestic rebar benchmarks, hovering around US$ 595 per tonne ex works (excluding VAT), offer scant reassurance of any substantive improvement in local consumption.

Amid this turbulence, there are glimmers of optimism, as exemplified by the recent trend towards appreciation of the Turkish lira against the US dollar, which is indicative of widespread confidence in Turkey’s macro-economic strategies. However, it is too early for a steel demand recovery in Turkey given that it will take a few more quarters before these orthodox strategies start to generate the desired returns.

The bad news is that iron ore prices look like they will continue to deteriorate through the second quarter as expectations remain pessimistic, given the anticipation of sentiment-driven rallies eventually abating. Ultimately, this could very well end up creating an oversupplied global iron ore market in the second quarter, undermining iron ore benchmarks and competing hot metal production costs for recycled steel.

Looking ahead, the landscape is fraught with potential downsides. While there is unequivocally demand globally for recycled steel as well as for semis and finished products, it is clear that such demand will be catered to locally. The anticipated increase in recycled steel demand due to EAF investments (especially in the USA, Canada and Europe) is paired with ongoing instability stemming from trade tensions, global conflicts and political events changing trade lanes and traditional routes to markets, thereby regionalising trade in a way that is reminiscent of 2015.

While some prospects offer promise, such as India’s significant capital expenditure driving steel-intensive projects, risks loom in the form of geopolitical escalations, further iron ore price declines and/or potential defaults in the Turkish property sector. Amid this uncertainty, a cautious sense of hope pervades, hinting at a future slightly more optimistic and forward-looking.

Harry Seale

ATLAS COMMODITIES LTD (GBR), Guest contributor

United Kingdom

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