Coil prices bottom out in Central Europe amid second wave fears

29th July 2020

Prices for steel coil appear to have reached the bottom of the current cycle, in Poland and the Czech Republic, following the substantial downturn witnessed in the second quarter. Steel mills are proposing hikes, but many buyers are sceptical about the prospects for price increases, in the near term. They expect that any rises will only be implemented in September, at the earliest.

Central European steel market participants are concerned about the potential for a second wave of coronavirus and the impact that it would have on demand and prices. The coal mining region in southern Poland is currently experiencing a high amount of Covid-19 infections. The national authorities hope to contain the spread with a programme of testing and isolation for mine workers. The Polish government temporarily closed a number of mines in June, due to a spike in infections.

In Poland, steel distributors report a slight improvement in activity, this month, but the market remains quiet, with few large volume deals being concluded. Although lower than they were previously, inventories of coil products remain high. Elevated stocks levels, along with the summer holiday slowdown, will restrict purchasing in the coming weeks.

Steelmakers are hoping that a recovery in the automotive industry will boost their order books, in the short term. So far, Polish distributors indicate that shipments to customers in that sector remain muted. The severe coronavirus-related downturn in carmaking had a substantial negative effect on prices and demand for cold rolled and galvanised coil, during the second quarter. At that time, mills and stockholders, faced with an order shortfall, attempted to boost their sales volumes to non-auto businesses.

One current bright spot for value-added material is the home appliance segment. A number of Polish white goods manufacturers have returned to full operations, following the recent shutdowns. Several companies are planning to forego their usual holiday closures to catch up with the backlog in orders.

The summer is expected to be a quiet time in the Czech steel market. Coil and sheet inventories at local stockists are high, and this is likely to limit purchasing in the rest of the third quarter. Although construction sector activity is performing satisfactorily in the Czech Republic, much of this work is for the completion of existing projects. A lack of new schemes is noted, due to the present uncertainty surrounding Covid-19 and the shortage of available finance. Supply chain participants are hopeful that increased public expenditure will offset, at least a proportion of, the downturn in privately funded projects.

Steel buyers across Poland and the Czech Republic are generally in agreement about their expectations for an improvement in demand, later in the year, and for a price recovery, however modest. Likewise, the consensus is that a dramatic upturn in Covid-19 infections would thwart any revival in the Central European steel market in 2020.

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