Global economy is being confronted with successive shocks at every step with convergence of energy crisis, inflation, recurring waves of pandemic and ever-rising geopolitical issues. Every sector experiences a slowdown in demand and prices as a result of such market conditions. However, in the ship recycling market, the offer prices from recyclers have remained supported due to extreme shortage of units available for recycling. As global outlook darkens with strong signs of recession in many parts of the world, it remains to be seen whether the offer prices will remain resilient due to this prevailing shortage of units or soften as demand for steel declines!
Steel mills across the globe, particularly in Europe, have announced scheduled outages this fall and have begun to significantly reduce steel outputdue to high energy costs and raw material prices amid a weak steel consumption environment. This is also expected to lower the demand for cokingcoal and iron ore and impact their prices negatively.
Steel demand from China, which accounted for 52% of the global demand in 2021, is witnessing a decline as the economy prepares for the combinedimpact of the property bubble, strict zero Covid lockdowns, and a severe ongoing heatwave. China's mega city of Chengdu has extended its Covidlockdown for a second time, with no end in sight as authorities struggle to eradicate an outbreak that is continuing despite stringent restrictions thathave upended businesses and daily life.
Cost-of-living crisis is already formenting social unrest in Germany, Italy and Czech Republic among many other countries of Europe. Thousands of people took to the streets in mass protests against the EU and NATO as they demanded neutrality in the war and action on energy prices.
A remarkable era spanning seven decades has come to an end with the passing of Her Majesty Queen Elizabeth II. Our thoughts and condolences arewith The Royal Family and everyone around the world mourning the loss of Her Majesty.
Offer prices from the recyclers of Alang have slightly softened this week as steel prices in the domestic market cannot be cushioned from the global downtrend. Additionally, many traders continue to opt for cheaper Russian steel over Indian-finished steel.
India has proposed to impose retaliatory customs duties under the WTO norms onabout USD 250 million worth of goods imported from the UK if no agreement isreached on compensation in a case concerning the imposition of restrictions byBritain on steel products.
As monsoon season recedes from India, the construction season is likely to commence soon, thereby bringing a relief to the domestic steel sector. Prices of rebar are not likely to correct further as inventory depletion is already allowing for need-based buying.
Recyclers from Chattogram are looking for tonnage which can be acquired under the ongoing LC restrictions as demand recovery is on the horizon with the approaching winter season.
Major Bangladesh-based mills continued to remain passive with many running on 50% capacity while others having suspended production for few days dueto slow demand from the downstream sectors.
Steel mills remain cautious about booking fresh material owing to LC restrictions, power outages, and subdued demand for finished steel.
The annual floods in Bangladesh have affected the purchasing power of the nation as it will be investing more funds on damage reconstruction, reducingGDP and foreign reserves.
The end buyers from Gadani are looking for small to medium-sized vessels as many yards are currently vacant, and the domestic demand is likely to improve during the winter months, which are expected to be a favorable period for the construction activities.
The market remains quiet this week as well, with few mills either suspendingtheir operations or curtailing production owing to sluggish demand forfinished steel products due to heavy rainfall and flood situations across thenation. Additionally, the piling up of finished steel inventory is creating liquidity issues in the absence of demand. Hence, many mills have loweredtheir offer prices in an effort to break even.
The Pakistani rupee persisted its losing streak against the US dollar throughout the week as the country continues to suffer an economic hit caused by heavy floods. There's a significant increase in import of food itemsas the floods have damaged the country’s crops and plantations, thereby adding to the dollar’s demand and straining the country’s trade deficit.
Turkey’s steel sector is heavily affected by low-priced imports from Russia.As Russian producers cannot export their products to many countries dueto sanctions, they export to Turkey at prices of upto 50% discount leadingto depreciation in prices and huge losses for Turkish producers and theoutlook for the fourth quarter seems much worse.
Imported scrap prices have softened by about USD 25/MT and are likely tofall further due to prevailing negative market sentiments caused by recentincrease in gas and electricity prices.
Government has increased electricity and natural gas prices for householdsby around 20% and by around 50% for industry, putting further upwardpressure on inflation.
Turkey’s annual inflation climbed to a fresh 24-year high of 80.21 percent inAugust, a bit below expectations according to official data, after the centralbank unexpectedly cut interest rates and stoked a cost-of-living crisis.