The aggressive interest-rate hikes by Central Banks around the world is making a soft landing harder to achieve and economists believe that a slowdown in economic growth is necessary to restore global stability. Fears of recession, waning consumer confidence and a drop in demand are bringing steel prices down, which in turn are lowering prices offered by recyclers to secure tonnage. While all the major recycling destinations are currently facing massive currency devaluation and inflationary pressure, yet the offer prices have remained relatively stable due to a paucity of tonnage in the recycling market as a result of robust freight rates across all categories of vessels.
Asian steel markets are hit by a heavy inflow of cheap Russian products, after sanctions blocked major western markets while war in Ukraine disrupted Black Sea exports. These unusual flows are weighing on prices and prompting possible trade counter-measures from some countries. Much of Russia's surplus steel, especially billets, have flowed to Turkey, but Russian steel mills are now also pushing to sell at lower prices to China and other Asian destinations.
European Central Bank, the central bank of 19 nations that share the Euro currency, surprised markets with larger-than-expected rate hike of 50 basis points, its first in 11 years. Following the rate hike along with the news of resumption of gas supplies from Russia to Europe, the Euro strengthend against the dollar.
European Union diplomats on Wednesday agreed on a new round of sanctions against Moscow for invading Ukraine, including a ban on importing gold from Russia and freezing the assets of the country's top lender Sberbank. Russia's foreign ministry reacted by saying that the latest round of sanctions will hurt the global economy and the progress in food export, which could trigger famine in Africa and the Middle East.
The domestic steel prices are on a downtrend due to multiple factors at play, such as availability of cheaper Russian steel, seasonal demand declines, inflationary pressure and reduced exports due to the levy of duty. Despite the fact that many yards have run out of stock, very few yards are interested in securing tonnage in such volatile conditions.
The Indian Rupee slipped to its lowest point till date and touched 80 against the dollar this week. The RBI’s rate-setting panel is due to announce its next policy decision on Aug. 5, and has time until September to bring inflation back to its target range.
The falling INR is giving confidence to domestic steelmakers that the import of Russian steel will soon fizzle out as the rupee weakens while the rouble holds its value against the dollar. This would negate the arbitrage that Russian steelmakers were able to offer Indian buyers compared with domestic prices.
Few recyclers are showing buying interest for small to medium sized tonnage but the offer prices are not increasing any further. Some tough decisions taken by Bangladesh Bank to discourage imports have made it difficult for end buyers to open LCs, thus lowering their confidence to finalize any deal.
The imported scrap trade is experiencing a slowdown as buyers are not actively booking materials due to import restrictions and frequent power cuts in the country.
An unsusal power crisis for the past one month has slowed down steel production in secondary mills. Presently, load shedding has been going on for at least six to seven hours a day all over the country. The power department is struggling to meet the electricity demand in the country's industrial factories.
The recycling market of Gadani is reeling under pressure as PKR continues to lose ground against the US Dollar amid political uncertainity and rising inflation in the country.
Major steel mills in Pakistan have hiked rebar offers by about USD 30/MT due to the continuous and unprecedented devaluation of the Pakistani rupee, increase in energy costs, and rising input costs.
In spite of Pakistan obtaining a staff-level agreement with the IMF last week to revive its bailout package, the IMF is now looking to access Saudi Arabia's commitment to financing Pakistan before issuing fresh funds, to ensure there is no funding gap and debt default. If there’s a risk of default, the IMF’s board may not approve release of the cash.
Two small units of about 2,000 LWT have arrived in Aliaga this week.
In response to poor business activities and low imported scrap prices, major steel mills pushed down their domestic rebar prices by about USD 20/MT. Domestic mills have to offer discounts to remain competitive with cheaper Russian billets.
Turkey’s Central Bank held its policy rate unchanged for a seventh straight month, as it again emphasized its expectation that the disinflation trend was expected to begin. The move came amid rampant inflation that neared 79%last month and an ongoing global tightening cycle. The bank cited supply and demand imbalances and an increase in energy prices among the factors behind faster inflation.