London — European and the Middle East steel markets are increasingly pricing in a Democratic win in the Nov. 3 US presidential elections, according to regional trading sources consulted by S&P Global Platts Nov. 2.
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Indications are the "pricing in" could further support the European steel product price recovery from a slump earlier this year at the height of the first wave of the COVID-19 pandemic. North-west European domestic rebar prices have returned to pre-pandemic levels while North European domestic hot rolled coil prices are up 18% year to date. Continuing strong steel production and demand in China into Q4 have also helped uphold overall steel market sentiment.
US dollar volatility may, however, impact steel pricing after the US elections, observers said.
Trade tensions seen persisting
International trade tensions are thought likely to persist -- particularly in the US-Turkey steel trade -- in the near term, whatever the US election outcome. The election is set to be hotly contested by Republican candidate Donald Trump and Democratic candidate Joe Biden.
Trade may also be quiet until Nov. 5, when the result of the election is expected to be clear, as players await the impact of the election result on the value of the dollar, according to a Turkish scrap agent.
"The markets are increasingly pricing in a Biden presidency," said a construction rebar trader based in Turkey. "Goes without saying, this would be bad for Turkey, as Trump seemed to have developed good rapport with his Turkish counterpart, and was cutting him a lot of slack."
While some observers have suggested that Biden could ease the Section 232 import tariffs which President Trump imposed on imports of goods including steel and aluminum in 2018, hitting the Turkish steel industry hard, others see moves in this area unlikely.
Turkey fears new sanctions
"Biden would toughen his stance on Turkey and is expected to play along with the rest of the political establishment in the US, which is clearly not very friendly with Turkey," according to the Turkish-based trader.
Other Turkish industry sources believe Biden may impose new sanctions on Turkey, as Turkey and US have some on-going unresolved trade disputes, including one related to Turkey's purchase last year of Russian S400 air-missiles systems, despite objections from both the US and NATO.
Any change in US trade policy is potentially crucial for the fortunes of the Turkish steel industry, the value of the Turkish lira and the livelihood of many ferrous scrap traders. Turkey remains the biggest importer of US ferrous scrap for its electric arc furnaces but saw its steel product exports to the US slide to 3% of its total exports in 2019 from 15% in 2016 due to the introduction of the Section 232 import quotas.
Some sources consulted consider that international protectionism could rise whoever wins the US election.
Impact on European steel sector
"The US election will not have a big impact I think," a market player at a Benelux service center said. "However EU-producers have asked the EU-Commission to sharpen the import-quotas. If that will happen prices will rise further."
An Italian mill source noted that while "the economy has been good in the US for quite some time [with Trump], but whether that translates to the steel industry in Europe, let's see."
According to the Turkish scrap agent: "Trump is better for Turkey -- Biden doesn't like us -- I don't expect much scrap market activity before Thursday [when result will be clear], and we also have to wait for the impact on the US dollar."