Steel prices fall in Southern Europe while US steelmakers announce increases

 
Now that many countries are loosening the restrictive measures put in place to counter the advance of Covid-19, the consequences of the pandemic on companies and markets are beginning to be outlined.

Steelworks have been hard hit and are gearing up to react quickly and limit the damage. As stated by MEPS, the situation they face, however, is different in the various parts of the world.

Overall, North America seems to be responding quite well to the relaxation of the containment provisions.
US steelmakers recorded a fall in the capacity utilization rates of near 50 percent. In the last few days, local producers increased their list prices, in an attempt to put an end to the recent freefall in steel selling values.

Data suggest that the US steel market will recover by the fourth quarter of 2020, but this will mainly depend on how quickly the consumer market will respond to the easing of the restrictions. Oil & Gas, agricultural, and construction industries are showing the first positive signals, while most of the automotive plants have resumed activities. At the same time, the government has announced massive economic measures with the aim of stimulating growth in the manufacturing and construction segments.

Above the border the situation is rather better. Canada hasn't been immune to steel selling value declines. However, prices have been partially protected by the weak Canadian dollar and by a high percentage of non-cancelled orders.

Forestry mills are beginning to reopen their gates and vehicle manufacturers will resume operations soon. Likewise, the manufacturing and construction industries are doing quite well, as demand remains reasonably good. Despite all these positive factors, steel buyers remain cautious and wait to see how the situation develops. General consensus is that, although signs of an improvement are evident, the recovery will be slow to materialize.

The situation appears to be vastly different in Southern Europe, where prices are falling due to the low demand. In Spain many steel producers are slowly adapting to the safety provisions relaxation, but are turning to industrial clients rather than the auto sector. Things look especially concerning for the Spanish automotive industry, as domestic vehicle production was curtailed in March, and then halted completely in April.

Flat product inventory is at its highest level due to a lack of demand, while uncertainty is leading customers to delay orders and payments, making the situation even worse. The Covid-19 safety provisions have also deeply affected the long products market. Demand had a considerable fall in March and April, which resulted in low order books and short delivery lead times from local mills.

In Italy most of the companies have been slowly resuming production. However, there is a major problem of a substantial lack of liquidity in the steel sector, with many buyers unable to make purchases. Service center stocks are higher than current demand requires. End-users either do not require material immediately, or cannot afford it. On top of that, several customers expect further price drops in the upcoming months, therefore, they have chosen to wait and see how the market evolves.

Additional negative pressure comes by aggressively priced import offers from Turkey and India, forcing Italian steel manufacturers to reduce prices even further in order to stay competitive. As if this was not enough, there are still many steel orders coming from China and South Korea which have been shipped during the lockdown and now await customs clearance.

Photo by worldsteel / Roger Ball