Demand woes, oversupply challenge EU distributors

Low demand, overcapacity, high production costs, competition from Asia, and the need for end-users to accept paying a premium for green steel were the main topics discussed by supply chain session panellists at the Kallanish Europe Steel Markets 2024 conference in Milan this week.

Tata Steel Layde managing director and EUROMETAL president Fernando Espada said he does not see any drivers for demand in Europe in the next six months, while the European Commission’s recent residual safeguard quota amendment is “unfair” (see separate story).

There is sufficient stock in the pipeline across Europe. “It’s not 2021 when there was no supply and auto [car production] lines stopped,” he noted. European production is meanwhile expensive due to factors like the European Emissions Trading System (ETS) scheme, which is reducing competitiveness and hampering exports outside the EU, Espada pointed out.

Italian steel market developments are mirroring the broader European challenges, according to Cesare Vigano, managing director of ArcelorMittal CLN. Real consumption remains low, and structural overcapacity is exacerbating the situation. He emphasised the problems in the service centre distribution sector, where low demand and overcapacity are causing significant difficulties.

Although there was a pricing recovery in the first quarter, this was due only to restocking, and this price hike has been wiped out again in Q2. Mills have attempted hikes on multiple occasions in recent weeks but are unable to defend them, Vigano observed.

Italian service centres’ margins are “suffering enormously”, he continued. “We saw in 2024 some slowdown that was very similar to 2009 and 2020. We are right at the same level – this is dramatic.”

Stock levels are not so high in absolute terms, but compared to activity, they are still high. The level at end-April was 6.7 months between stock in warehouse and orders being placed, while the normal rate is 5.4-5.5 months, Vigano noted.

Werner Wijne, category manager steel at Netherlands construction company Royal Bam Group, and Patrik Németh, marketing strategist at Hyundai Steel Slovakia, addressed the aspect of demand for green steel in the construction and automotive sectors.

While Bam wants to decarbonise and source green steel for construction projects, it needs its customers to get on board and accept the additional premium required. “The customers are not ready to pay for it [green steel] at the moment,” he said. “Without the customer, we cannot fulfil our [decarbonisation] journey.”

Automotive companies are however beginning to engage with green steel, as it is a matter of prestige for automakers to use green steel in car production, Németh said.

Elina Virchenko UAE

kallanish.com