Day: 3 March 2020

Serbia is expecting balanced public finances with only a small budget deficit in 2020, giving the government the opportunity to invest into more steel-consuming infrastructure projects. However, EU safeguard tariffs are hampering Serbian steel exports and therefore its economic growth, according to Mihailo Vesovic of the Chamber of Commerce and Industry of Serbia.

“EU safeguards are the elephant in the room,” Vesovic told delegates at Monday’s Irepas meeting in Belgrade attended by Kallanish. The bloc considers Serbia a third country. However, HBIS Serbia is one of Serbia’s largest exporters and of strategic importance to the nation’s development, he continued.

“Also smaller producers in Serbia are facing big competition [… in exports to Europe]… from Turkey, Ukraine, from India… so they are having a problem to stay and survive in the market, and at the same time to be competitive,” Vesovic observed.

The Chamber and Serbian government are negotiating with the EU to secure a higher quota. “In July last year they [… the EU] said, ok, from this January there is going to be a 5% rise of the quota – we are expecting to push them a little bit higher because steel is one of the main export products coming out of Serbia and it’s one of the drivers of our economy,” Vesovic explained.

The country is also hoping to negotiate the removal of Kosovo’s 100% tax on Serbian products, he added.

The expectation is for Serbia to accede to the EU by 2025, although this could be delayed on account of the bloc’s own internal issues, Vesovic said.

Economic activity in the so-called “West Balkan 6” countries is on the rise, but the region suffers from a shortage in skilled workers. The Chamber is lobbying for a “… small Schengen” to provide free movement within the region.

Foreign direct investment has boosted employment, “… but to make it sustainable we need to have a much clearer goal of free movement of goods, people and investment,” Vesovic said. Improved connectivity of rail and roads, and the reduction of delays at borders could boost regional economic growth by 0.5-0.7%. However, this is a highly political process and will take time, he concluded.

Activity by companies in the French construction sector remained stable month-on-month in February, according to a l’Institut National de la Statistique et des Études Économiques (Insee) report monitored by Kallanish.

Last month companies said they were more optimistic about the prospects for future activity and the general state of the French construction industry. More construction sector managers than in the previous month indicated an increase in their activity over the last three months.

In February fewer companies than in January reported that they increased their staff size in the last three months. Employment prospects are deemed more favourable than in January however, the report says. 

As many companies as in the previous month considered their order-books to be well-filled. Companies also assess their order-books as providing almost eight months of work, higher than the long-term average of 5.7 months.

The production capacity utilisation rate rose last month. At the same time, 45% of companies reported production bottlenecks due to workforce shortages, a little higher than the previous month.

As many companies as in January announced that they will increase their prices over the next three months, the report reveals.

The UK Manufacturing Purchasing Managers’ Index (PMI) rose above the 50-point neutral mark in February according to the latest survey by IHS Markit and the Chartered Institute of Purchasing and Supply (CIPS). Output rose at the fastest pace since April 2019 and vendor lead times lengthened as coronavirus supply-chain disruption rose, the survey results monitored by Kallanish revealed.

The seasonally-adjusted IHS Markit/CIPS PMI rose to 51.7 in February, up from 50.0 in January, but below the earlier flash estimate of 51.9. The PMI posted above the 50.0 neutral mark for the first time in ten months.

Manufacturing output increased at the fastest pace since April 2019, as growth strengthened in both the consumer and intermediate goods sectors. In contrast, the downturn at investment goods producers continued.

“The main factor underlying output growth was improved intakes of new work. Business optimism also strengthened, hitting a nine-month high, reflecting planned new investment, product launches, improved market conditions and a more settled political outlook,” Markit/CIPS says.

The effects of the COVID-19 outbreak had a noticeable impact on supply chains during February. Average vendor lead times lengthened to the greatest extent since July 2018, while the eight-point drop in the level of the seasonally-adjusted ‘Suppliers’ Delivery Times Index’ was the largest in the 28-year survey history.

UK crude steel output rose year-on-year in January, bucking the general European trend, but the sector now faces the combined effects of Brexit uncertainty, poor weather, and coronavirus-induced economic inertia.

Turkish long steel producer Koc Metalurji, which worked with reduced capacities throughout the year due to sluggish market sentiment, has broken the output record at its meltshop late last week by reaching 51 castings into billet within a day, Murat Umur, general manager at the company, told S&P Global Platts Monday.

“We have thus reached an output of 5,108 mt/day this weekend at our meltshop, which could be even a world record,” Umur said.

“As the most active period begins with spring, we are expecting the rise in domestic demand to continue in the coming weeks,” the GM added.

Koc Metalurji, based in Osmaniye, southern Turkey, has the capacity to produce 1.2 million mt/year of liquid steel and 500,000 mt/year of rebar.

Due to a notable decline in Turkish steel consumption and slow export demand, some Turkish longs producers announced successive production cuts last year, while some of them, like Koc Metalurji, temporarily stopped production, as reported.

Turkish producers’ capacity utilization has been improving since the last quarter of 2019, with some recovery signs for demand.

Turkish producers received some orders for prompt shipments in the previous weeks, as some overseas buyers directed some of their unfilled orders to Turkey amid Chinese absence due to COVID-19 outbreak. This has also has given some support to Turkish mills’ output figures and product pricing in recent days.

However, the military situation in Idlib, northern Syria, and the COVID-19 outbreak could be a determinant factor for demand and price direction in the coming days, amid sharp exchange rate fluctuations in Turkey, some industry sources observed.

Some major Turkish long steel producers, which continued efforts to keep their domestic rebar offer prices above $440/mt in this sentiment, meanwhile hiked their lira-denominated domestic rebar list prices again on the first trading day of the week, amid lira depreciation, and started offering 12-32 mm rebar to the domestic market at Lira 3,300/mt ex-works Monday, including VAT, Platts learned.

— Cenk Can