May 19, 2020
EUROPEAN FLAT STEEL MARKET AWAITS RETURN OF AUTOMOTIVE DEMAND
The return of automotive demand for flat steel has been slow to materialize in Europe with calls for state-funded car-incentive schemes to spur demand, sources told S&P Global Platts.
A German distributor said although prices are climbing in China, domestic European prices are still “under pressure” with mills looking for volumes in June. “They (the mills) have to give discounts to secure any quantities.”
The return of the automotive industry in stages has been slow to materialize into meaningful demand, according to the same source, who said, “Here in Germany, the automotive industry restarted two weeks ago, with just one shift. Volkswagen has idled some of their assembly lines because sales are low. People are waiting for a car-buying incentive program to boost private car sales and demand.”
An Italian mill source said he would wait before taking any kind of position, due to uncertainty around prices. He added the market would need to wait to see if there was stability in Asia and if there would be “some effect in Europe” of the antidumping probe around Turkish hot-rolled material, as well as the European Commission’s revision of safeguard quotas.
A Northern European mill source was pessimistic on automotive demand returning quickly.
“Steel distribution was down 70% in April and for May everyone hopes this will improve to 50%, but I am not so sure that is achievable. In the construction sector, this should be the busy period right now but with social distancing I am not so sure the demand will come back as expected.”
June would be key time for European mills when order books would be thinner resulting in shorter lead times in steel coils, the mill source said, adding the outlook from there on would be highly dependent on summer maintenance shutdowns, if mills would cut additional weeks of production either side of the planned outages, and the EC review of safeguard TRQ system.
As European market sources look to the Chinese market, HRC gained $8/mt Friday as Platts assessed HRC SAE1006-grade FOB China at $409/mt, up 3.8% from the year-to-date low of $394/mt seen on May 7.
However, Chinese HRC prices are still down some 19% from pre-pandemic levels, and in the period since Wuhan emerged from lockdown on April 8, Chinese HRC has posted only five days of gains out of 24 assessment days.
The Platts TSI hot-rolled coil index was calculated Friday at Eur428.50/mt ($463.25/mt) ex-works Ruhr, declining Eur2.50 day on day and Eur8 week on week.
In Southern Europe, HRC gained 50 euro cent for a second straight day and was assessed at Eur414.50/mt ex-works South Europe, down Eur4 on the week.
Cold-rolled coil was assessed unchanged on the day at Eur522.50/mt ex-works Ruhr, but ending the week down Eur2.50.
— Len Griffin, Amanda Flint
Source: Eurometal
