Germany’s carmakers have reduced their production activity so far this year, and have considerably lowered their intake of steel accordingly. The extent of this however is not all that clear, market sources tell Kallanish.
While some say that this was already visible in December 2018, even a major player such as Klöckner & Co was caught off-guard by the true impact, and forced to issue a profit warning last week. According to Klöckner ceo Gisbert Rühl, German car production has fallen by -19% year-on-year. Opinions on this can vary however, depending on timing, and the parameters used in comparing the data.
Regarding the effect on strip, one manager tells Kallanish that he has heard of a figure of -35% to -40% less being ordered from colleagues at some service centres. “Normally, -5% used to be called a disaster, so I’m not sure how to interpret what I hear,” he says.
At Klöckner, certainly an experienced company with many activities associated with flat products, its (strip) service centres are especially seeing difficulties, while rebar bending shops do fine. “We had actually expected stable call-off figures from the automotive industry, but they were amended,” Rühl admitted when talking to Kallanish.
Given that production activity in the mechanical engineering industry is still quite healthy, Klöckner could divert sales in that direction, where, however, “… it is mostly a spot business at lower prices,” Rühl says.
This development is naturally bringing down steel prices, especially for higher grades (see separate article). One manager primarily active in the galvanized sector tells of the bad habits that big customers demonstrate when the market softens. They not only call off lower tonnages, “… but may even refuse to call off anything at all despite existing contracts, and go buying at spot prices at someone cheaper,” he claims.
