Coronavirus Pandemic Clouds European Steel Price Outlook

European strip mill product basis prices continued to move up in late February/early March 2020. Indeed, a number of steelmakers were proposing further hikes, in order to improve their profitability. Local supply remained tight, due, in part, to production cuts carried out by the mills, in recent months. This continued to bolster prices. Delivery lead times were extending, for some products, into the end of the second quarter. Third country quotations were still at a premium to local offers.

Nonetheless, several negative factors are now affecting the market. These include a lack of any substantial improvement in real consumption and, more importantly, an unquantifiable threat from the coronavirus outbreak, which is spreading at an alarming rate. This uncertainty in relation to short-term demand is leading to noticeable caution in decision making regarding purchasing. Moreover, increasingly competitive offers, from overseas suppliers, are reported in southern Europe. 

German buyers fear potential material shortages 

German customers advise that domestic supplying mills are almost fully booked for the second quarter. Service centres have limited availability on certain grades/sizes. Third country offers exist, but no significant orders have been placed. MEPS notes a substantial amount of uncertainty caused by the rapidly spreading coronavirus. Buyers fear potential material shortages. This allowed steelmakers to impose price hikes, during early March settlements. Further increases were proposed, going forward. 

French customers delay Q2 negotiations 

End-user activity was quiet, in France, in February, mainly due to the school holiday period, but picked up at the beginning of March. Nevertheless, the effect of the coronavirus could lead to a slowdown in the coming weeks. Prices continued to increase, this month. Buyers anticipate stabilisation, or even small downward movements, in the near term, depending on the size of the mills’ order books. Negotiations tend to be on a case by case basis. A number of customers report delaying their negotiations for second quarter contracts, hoping that producers will accept a smaller rise than originally sought. 

Buyers in Belgium struggle to assess coronavirus impact 

Belgian buyers advise that it is difficult to estimate the impact the coronavirus will have on the evolution of steel demand and prices. Holidays resulted in very quiet market conditions, in the second half of February. Steel consumption is falling. Meanwhile, production is reduced. Nonetheless, further upward price movements were recorded, in March. 

Italian mills shut down production 

In early March, Italian steelmakers, Arvedi and Marcegaglia, advised customers that they were still producing and delivering orders, despite the restrictions on movement decreed by the Italian government because of the dramatic spread of Covid-19. However, a number of other mills have shut down production. The steel market, which was improving a little, in the first half of February, has slowed again. As a result, strip mill product prices stopped moving up and even lost a few euros, in some instances. Service centres are only purchasing small quantities to fill gaps in their inventories. They were unable to pass on the recent mill price increases to their customers. Third country imports are becoming cheaper. 

Demand weakens in Spain 

In Spain, delivery lead times are out to May/June. The lack of healthy demand makes purchasing, that far ahead, a difficult decision. Basis values continued on an upward trend, during settlements made in late February. Since then, buyers are reluctant to pay more and are insisting on a rollover of existing figures. Third country import prices reduced over the last few weeks. Buyers anticipate further cuts. Order books were reasonable at the start of March but, now, demand has weakened, as the coronavirus measures take hold. 

Resale values picking up in the UK 

UK buyers question whether the coronavirus problem will negatively affect demand sufficiently to create oversupply pressure. Customers are cautious regarding buying more stock if they will struggle to sell it. For the moment, supply is quite tight as steelmakers’ delivery lead times continue to extend. Service centres note that resale values are starting to pick up.