European steel prices are likely to rise further in the coming months as various factors limit material availability while demand picks up, according to Assofermet Acciai president Tommaso Sandrini.
European steel market is in a state of panic
The European steel market is in a state of panic, as participants believe there is not enough material to meet demand. “Many are wondering, are we back in 2008?” said Sandrini at the Kallanish Europe Steel Markets 2020 virtual conference on Wednesday. European mills are fully booked for the first quarter, with some offering limited material for April.
Result of trade protection measures blocking imports
This is the result of trade protection measures blocking imports and the concentration of production in a limited number of mills. In addition, the Covid 19 pandemic has led to a dramatic drop in production, while consumption has recovered to pre-pandemic levels in recent months.
Almost all major exporters of hot-rolled coils to the EU are blocked
Almost all major exporters of hot-rolled coils to the EU are blocked, the safeguard revision earlier this year halved the available HRC quota, and the anti-dumping investigation is preventing any negotiations with Turkish suppliers. “So the main message is that imports will fall even further in the coming months,” Sandrini said.
EU: 17% of installed capacity is unavailable
Ten blast furnaces are now idle in the EU, meaning that about 17% of installed capacity is unavailable. Regional production will actually fall below 2009 levels in 2020.
EU market is reducing its stockpiles by 8 million tons
Meanwhile, the EU market is reducing its stockpiles by 8 million tons since 2019, followed by another 11 million tons expected in 2020. Those two years combined exceed the 16mt of destocking from 2009. “So the system is short of steel right now,” Sandrini explained.
Mills will likely increase production significantly
In the coming months, mills will likely increase production significantly, but the impact won’t be felt until the second quarter. The expiration of safeguard tariffs or their extension in a “…lighter” format should allow for some import opportunities. Weakening demand for automobiles and white goods will be offset by higher demand in construction, driven by EU stimulus measures.
In the longer term, the EU protection regime will need to be completely rethought, as an adjustment of carbon limits cannot coexist with existing trade protection measures, Sandrini concluded.
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