Stainless Steel Market Adapting to Coronavirus Restrictions

4th May 2020

Stainless steel service centres and distributors, in many parts of Europe, reported relatively strong sales during the first three months of 2020. However, the coronavirus outbreak led to a decrease in purchasing activity, from late March.

During the pandemic, European governments have deemed the steel supply chain as essential business. Therefore, much of the industry remains open and many companies are supplying steel or manufacturing critical parts, for the medical and pharmaceutical sectors.

However, closures and a reduced level of demand are witnessed in several other downstream markets. The stringent lockdown measures, implemented in certain countries, led to numerous shutdowns, at production and distribution facilities.

Those organisations continuing to operate are adapting to new ways of working. Many are allowing office staff to work from home, whilst implementing social distancing measures for employees who are still on site. In addition to the restrictions on the movement of people, businesses are faced with disruptions to their traditional supply chains and increased logistical difficulties.

Sales volumes slashed

Most stainless steel distributors reported a shortfall in orders, in April. For the majority, a decrease of around 40-50 percent of normal levels, for this time of year. Those operating in the most severely affected countries, particularly in southern Europe, indicate that sales are just 30 percent of typical volumes. It is expected that a low level of activity will persist throughout the second quarter.

Supply chain participants are currently operating in survival mode. During this unprecedented period of uncertainty and amidst severely reduced demand, minimising costs is a priority. Many companies are utilising national support, by furloughing staff or applying for financial assistance from their respective governments.

Stainless steel service centres and stockists are reluctant to build inventory and are only purchasing for immediate requirements. Planned stock investments are, temporarily, on hold. Buyers are looking to postpone or, in some cases, cancel orders with the mills.

Hopes of recovery

Positive signs are developing in several European countries, where successful efforts are being made to contain the spread of the virus. Governments in those nations are gradually starting to relax containment measures. This has encouraged certain end-user markets to restart operations.

A small uptick in activity, for most businesses, is expected in May. However, market participants are concerned about the duration and shape of the revival. A lack of visibility over future demand is noted, especially for the second half of this year. The threat from a subsequent wave of infections could extend the period of recovery into 2021. It will take time for consumer confidence to be restored. For now, the markets’ expectations are restrained, and long-term plans remain on hold.

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