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Political Uncertainty Unnerves Business Confidence in Several Emerging Markets

Date: 2019-04-30
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In Brazil, the Instituto Nacional dos Distribuidores de Aço (Inda) reports that, in March 2019, domestic flat rolled finished steel sales totalled 312,900 tonnes – up 19.0 percent, compared with the corresponding figure in the previous year. However, the association is forecasting that both sales and purchases of flat steel will fall by almost 10 percent month-on-month, in April.

The trading environment is gathering momentum, in the Russian Federation. Flat product suppliers are now offering material from their scheduled June production. Bullish distributors are forecasting that sales volumes of finished long products will increase, in May, remarking that construction activity will benefit from improving weather conditions. Consequently, domestic ferrous scrap costs are projected to fall, amid an upturn in collection rates and less transportation disruptions.

The Indian steel industry is forecasting that underlying demand will remain tepid, until after the country’s general election campaign is concluded (April 11 to May 19). Traders and service centres are questioning the sustainability of the current transaction values, specifying that price support is limited. Traditionally, in this period, government infrastructure spending is on hold and end-users defer forward orders. Additionally, the Ministry of Steel is reported to be contemplating expanding the product coverage of “Steel and Steel Products” (Quality Control) Order. Importers are becoming cautious regarding purchasing from overseas, as a result.

The outlook for the Ukrainian market is unchanged. Domestic steelmakers reined in their pricing ambitions, for April business. Underlying consumption has fallen short of industry projections, after a slow start to the construction season. Manufacturing firms are finding it difficult to obtain credit, which is inhibiting their ability to purchase steel products. The local association of metal producers, Metallurgprom, report that finished steel production, in March 2019, totalled 1.694 million tonnes – up 14.8 percent, month-on-month.

The business climate is fragile, in Turkey. Stockists are concerned about carrying too much inventory over the next two months. End-user demand is limited. The situation is being exacerbated by political uncertainty and the imminent festive month of Ramadan (commencing May 5). Exporters are focused on developing new business ties in Asia.

Business activity is lethargic, in the United Arab Emirates. Distributors are reluctant to place new orders, expecting daily operations to slow down, in late April, ahead of the Ramadan holidays. MEPS’ research indicates that demand for finished long products, will remain tepid, in the June-August period. Export opportunities are limited outside the GCC region.

In South Africa, downstream demand for finished steel is growing at a slower pace than expected. No new state-funded infrastructure or construction projects will be confirmed until after the general election on May 8. Meanwhile, ArcelorMittal South Africa is reported to be restarting the electric arc furnace at its Vereeniging steelworks. The facility was made idle four years ago.

Mexican service centres envisage limited movement in activity in the near term. Meanwhile, the National Chamber of Iron and Steel Industry (CANACERO) is lobbying the government for additional measures to protect the domestic manufacturing and steel industries from foreign competition.

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