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Dirk Weyrather: The market has become ever so volatile
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Do you think the US market is performing better nowadays?

I would not say that the US market is performing better than the other markets, but it is performing better than it did in the last two years. Nevertheless, compared to other markets, it is certainly still underperforming. My feeling is that many customers in the US market have been buying only to meet the most necessary of their needs and in much less volume than they usually would do. And normally this indicates that prices should not drop any time soon, as inventory replenishments will be a bit more regular because of smaller individual order size.


What is the influence of the political turmoil in the Middle East and North Africa on your trading activity?

It is certainly hurting the trading activity in general. It is a matter of how long the turmoil will continue and how fast the countries can settle down and get into quiet waters again. Should that happen relatively fast and should new governments set out really determined to rebuild or to boost the economy of their countries, I would believe that we might be even looking at a boom, yet the question is will that happen and when will it happen.


Do you have any predictions for the future of this region, in terms of demand or regional production?

The regional production has been going up tremendously of course, particularly in the Middle East, supported by the boom in the UAE, but also certainly fueled by the regular demand in Saudi Arabia. In the medium term, maybe even in the short term, these may make the Middle East a potential exporter, instead of an importer.


Do you think the Saudi Arabian market is currently in better shape as compared to other regional markets?

They are still doing comparatively better, but I think people are also wary regarding the potential political unrest which seems to be boiling under the surface in Saudi Arabia and has not reached surface yet. This situation needs further observation.


Do you think high infrastructure spending will continue as before in the region?

If the political situation is brought under control in those places where there is political unrest, I would well imagine that particularly in Saudi Arabia or Yemen -Yemen has pretty much underdeveloped infrastructure - we will certainly be able to see quite a number of infrastructure projects. I think the UAE has already undergone tremendous development in terms of infrastructure and here I see that more a leveling-off situation has been reached.


After the Japanese earthquake, has there been any steel supply shortage in Southeast Asia because of reduced Japanese exports?

If we are talking about long products, and I cannot say that Japan has been very much a determining factor in the long product scenario in Southeast Asia in the last couple of years, there are some opinions around that the rebuilding of the infrastructure in Japan, whenever it starts, may create increased demand in Japan. And some neighboring industries in South Korea, Taiwan and China would mostly benefit and a further consequence of this could eventually create demand or shortage in Southeast Asia. But I think that we are still very far away from having a proper picture of what to expect in Japan after the nuclear disaster.


Do you see any reflection in prices?

Not yet. Prices in Southeast Asia are currently under pressure, as in East Asia. Some local producers are hoping that they will benefit from the eventual reconstruction in Japan. However, it is still too early to determine how realistic these expectations are.

There are some rumors suggesting that China will also cancel its export tax rebate for boron-added products. If this happens, what will be the impact of this decision on Chinese steel exports and also on the Chinese domestic market? Do you think that pressure from inventories is increasing in the domestic market, pulling down prices?

If the export rebate rate is cancelled, there will be less exports from China, but not really affecting long products, since China already stopped exporting long products years ago. However, flat products may be impacted, because the Chinese are currently the cheapest for certain products, such as hot rolled coil, hot rolled plate...etc. It will increase the pressure on the domestic market in China. Whether these regulations indeed are going to be introduced... it is really very hard to judge. Every year, on official holidays like the May and October holidays, the market talks about the rumors of government measures to limit exports. I would say that only in one out of three cases something has actually happened, or even less. So it is something that one will only know for sure come May first. We have heard from some Chinese mills that they do not really believe in the reports. However, this may of course be just the official version from the mills, because they would like this to be heard.


Which are the most promising markets nowadays?

Certainly we see reasonable business in Latin America. We do see improved demand in some European countries, like Germany. We do see quite solid demand for steel products in Russia, and now spring has arrived. Unfortunately, this demand is covered almost entirely by domestic producers. Demand in certain sub-Saharan markets remains solid to good. However some credit insurance issues prevail in these markets, so payment risks remain to be watched. Also in terms of demand, the Southeast Asian markets seem to be doing quite all right, on low price levels though.


What is your short-term outlook for long steel products?

There are lots of question marks, because the market has become ever so volatile and less predictable. Traditionally starting from April and May at the latest, the market sees higher demand, because of the end of winter in the northern hemisphere. And, traditionally, calendar years always start very slowly. However, this year we saw very strong months of January and February, and a decline in March. Against the initial expectations suggesting that as of April things would improve a lot, we saw the political turmoil in North Africa and in some parts of the Middle East and the earthquake in Japan, followed by a nuclear disaster. And these raised lots of question marks.

The understanding that I have gained during this conference is that people are expecting the second quarter to remain relatively dull, with the possibility that things may improve by the end of the second quarter. However, if Japan is not in a position to keep exporting scrap to the Southeast and East Asian markets, those scrap supplies will have to be replaced by scrap of other origins. Then we might see an upswing earlier than expected, even within four or six weeks. But that depends a lot what is going to happen with Japan in the short term, and that is hardly predictable.

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