Southern European Prices Fall as Lockdown Eases

Spanish society is slowly adapting to the relaxation of some anti-coronavirus measures. Many steel distributors are back at work, selling mainly to industrial clients rather than the auto sector.

Domestic vehicle production dropped sharply, in March, and then stopped completely, in April. The lack of demand, for coated coil, led to substantial discounting by the mills.

Flat product inventory levels remain high, and purchasing is slow. Uncertainty exists as customers delay payments and deliveries. A number of Spanish distributors have bought small quantities of low-priced imports, for arrival at the end of July.

In the long products market, demand dipped considerably, in March and April, because of Covid-19 measures. Consequently, order books are low, and delivery lead times, from local mills, are very short.

Liquidity Squeeze Hits Italy

The Italian authorities gave the go-ahead for industrial production to restart on May 4 and the end of lockdown on May 11. Lack of liquidity is a major problem in the steel sector, with many buyers unable to make purchases. Moreover, several customers adopted a ‘wait and see’ attitude, anticipating that strip mill product prices would drop sharply.

Service centre stocks are higher than current demand requires. Resale values, so far, are holding up better than mill prices. Competitively priced import offers, from Turkey and India, are creating further negative pressure. In addition, previously ordered material from China and South Korea, destined for the carmakers, arrived during the lockdown and now awaits customs clearance.

Order intake at Italian distributors is very slow and not expected to pick up quickly. End-users either do not require material, immediately, or cannot afford to purchase it. Mills need new orders. This is leading to significant price reductions, further exacerbated by the aggressively priced import offers.

The oversupply situation is not as acute for galvanised coil as that for the other strip mill products. Nevertheless, prices were marked down substantially, in May. Italian producers hold significant quantities of inventory, especially for the automakers, who will be slow to recover.