Since the end of last week, a number of major European steelmakers have decided either to stop or drastically reduce output due to the spread of coronavirus and emergency measures taken by different countries.
The first stoppages were witnessed in northern Italy, but now the trend is becoming more widespread in Europe. Companies in Spain, the second-most impacted country in term of coronavirus spread have now also begun to take preventative action. More of the same is expected in key steel-producing countries such as France and Germany.
While stoppages are intended to protect the health of the workforce at the mills, the market is expected to benefit from reduced output at a time of market uncertainty and lower demand. Going forward nevertheless, some availability issues could arise, putting even more stress on the existing European Commission’s steel safeguard measures.
The biggest challenge can be seen in the rebar market. A number of producers in northern Italy announced production halts and some are part of groups with activities in other countries such as Spain, France and Germany.
The lower availability of rebar will not pose an immediate problem, but difficulties may arise when demand returns. Imported product is not widely available due to the safeguard measures. Almost all the quotas for Turkey, Russia and Ukraine for rebar have been used up. From the beginning of April until the end of June only around 40,000 tonnes of quotas for each of the countries will remain available.
“It is still too soon to say, but if the coronavirus emergency continues for longer than expected there could be the possibility for Turkey and other key importers to put pressure for a change or revision of the safeguard measures in Europe,” a trader tells Kallanish. “Turkish, Russian and Ukrainian mills are expected to be much less impacted by the virus and they could become important suppliers in a period of emergency going forward. Not to mention Asian producers that have undergone the impact of the virus before Europe and the US have done.”
In addition to rebar, other quotas either exhausted or at a critical level include merchant bar, hollow sections and gas pipes. In the flats’ sector, metallic coated coils both in the 4a and 4b classifications from Asia have also mostly been taken up. These sectors could well be impacted by the ongoing growth in the number flats suppliers halting production in Europe.
