The steel markets in Europe and the Middle East are experiencing a lot of price volatility as the US presidential election moves in favor of the Democratic candidate, according to sources from S&P Global Platts.
European & Middle East steel industry fluctuates due to US election 2020
Northwest European domestic prices of rebar have returned to pre-pandemic levels while domestic North European domestic hot-rolled coil prices are up 18% year to date. Steel production continued to increase and the demand in China in the fourth quarter also helped maintain the market sentiment. However, many investors predict that the volatility of the US dollar could affect steel prices after the US election.
Trade tensions are seen persisting
International trade tensions will persist – particularly in the US-Turkish steel trade in the near term, regardless of the US election results in favor of Republican candidate or Democratic candidate.
Trade transactions will also be quiet until the end of today, 5 November, when the results of the scheduled elections are announced. A lot of investors are waiting for the impact of the election results on the value of the US dollar.
“The markets will see a huge price volatility if Biden comes to power”, a Turkish-based construction steel trading company said. Needless to argue, this will have a negative effect on Turkey’s steel industry. President Trump, during his term, has developed a good relationship with his Turkish counterpart.
Meanwhile, many investors believe that Biden can ease the Section 232 import tariffs, an item that President Donald Trump imposes since 2018. This applies to both steel and aluminum; and has had a strong impact on the Turkish steel industry.
Turkey fears the new sanctions
“Biden will take a hard stance in relations with Turkey and might play along with the rest of the political establishment in the US. That is clearly not very friendly with Turkey”, said a Turkish investor.
Other sources have suggested that Biden may impose new sanctions on Turkey, as Turkey and the US have a number of unresolved trade disputes. That includes a dispute over Turkey’s purchase of Russia’s S400 air defense missile system last year, despite objections from both the US and NATO.
Any change in US trade policy has an important effect on the fortunes of the Turkish steel industry, the value of the Turkish lira, and the livelihoods of many black scrap traders. Until now, Turkey remains the biggest importer of ferrous scrap in the US, the main raw material for electric arc furnaces. However, the export volume of Turkish steel products to the US has decreased to 3% in 2019 (from 15% in 2016). It is due to the application of Section 232 import quotas.
Impacts on the European steel industry
“I think the US election won’t have a big impact,” said an investor at the Benelux service center. “However, EU-producers have asked the EU Commission to sharpen the import-quotas. If that happens, steel prices will rise even more.”
A source from the steel mill in Italy noted that “The US economy has been quite good for a while (with President Trump). Whether that translates to the steel industry in Europe, let’s see “.
According to a scrap agent in Turkey, “Trump is better for Turkey, Biden does not like us”. “However, I do not expect much of the scrap market activity before Thursday (when the results will come out). In addition, we also have to wait for the impact on the US dollar”.