European steel coil prices forecast to reach record levels
Tight supply is expected to propel sheet and coil prices, in Europe, to all-time high figures, in the near term. The recovery in the Chinese steel market, following the Lunar New Year holidays, was stronger than anticipated. This is supporting the price of steel and raw materials, worldwide. A shortage of competitive import quotations has developed in Europe.
The availability of locally produced material is extremely limited. Mill delivery lead times are very extended. The recovery in steel output continues to be insufficient to meet current demand. Several steelmakers are encountering technical problems when restarting equipment.
Recent adverse weather conditions have restricted steel production and deliveries across the region, adding to the tight supply situation. Consequently, European coil prices are forecast to continue their upward trend, in the April/June quarter.
However, a downward correction in steel transaction values is predicted to occur in the second half of 2021. Movement towards restoring the balance between supply and demand is expected.
The unprecedentedly high cost of steel is creating severe financial pressure for many companies. It is negatively affecting existing projects and delaying the commencement of new schemes. Moreover, the automotive industry’s requirements for coil are forecast to decline, as a result of a shortage of semiconductors and subdued vehicle sales.
The continued resumption of previously idled steelmaking capacity is envisaged, both within Europe and globally. This should lead to an increase in supply from local and foreign sources.
A reduction in raw material costs is projected during 2021. Current iron ore values at US$165/170 per tonne, CFR China, are considered unsustainable. Moreover, an upturn in output by the miners is foreseen.
Despite the anticipated downward correction, European coil prices and mill profit margins are expected to remain at historically high levels, in the medium term. Economic activity should improve, as vaccination programmes are rolled out.