Demand recovery is the festive wish for steel suppliers

During the festive season, children all over Europe wait in eager anticipation of receiving and opening presents. Likewise, steel suppliers across the region are looking forward to the gift of a recovery in demand and prices. 

The traditional gift-giving season, in Western Europe, extends from Saint Nicholas Day in early December to Epiphany in early January. Current signs are that steel distributors will have to wait even longer for a solid demand recovery – perhaps beyond the Chinese New Year in late January. 

There are indications that the bottom of the market, at least for hot rolled coils, has been reached. In Italy, the lowest offers have been withdrawn and increases announced. These have yet to take full effect. In some instances, ex-stock material is still available at less than mill prices. 

Significant cuts to nominal production capacity have been made, over the past few months. Steelmakers are considering an early shutdown, in December, and extended maintenance. January availability, for certain products, is already diminishing. 

Automotive contracts, for 2023 supply, are still a long way from any agreement, and negotiations continue. Buyers are seeking to bridge the gap between this year’s contractual deals and current spot market prices. Producers, on the other hand, cannot afford to set too low a benchmark for such key business. 

Long delivery lead times and minimal price advantage reduce the attraction of imports. The threat of antidumping measures on Japanese-origin steel is discouraging orders. The decision of the Indian government to remove its export tax, however, led to heavy buying by European service centres and traders, during the past month. Reports indicate that the country’s first quarter quotas will be oversubscribed. 

Market sentiment might not be substantially more positive but it is, certainly, less negative. Caution is the watchword, with buyers reluctant to commit to large volumes, in case prices fall again. Only a small jolt will be needed to grant distributors’ wishes and stimulate demand.