The demand for long products in the European Union continues to be relatively positive compared to the flats sector. A number of challenges remain in place however, according to Amit Sengupta, cmo and vice president for ArcelorMittal Europe Long Products speaking at the Kallanish Europe Steel Markets conference in Amsterdam this week.
The executive notes that market demand for long products has grown steadily since 2014, reaching a level of some 56 million tonnes last year. While this volume could be attained again this year, it still remains over -15% below the 2008 level.
Despite the relatively good signals from demand, the sector continues to be challenged by overcapacity. ArcelorMittal calculates that capacity utilisation at long mills in Europe reached 65% in 2017 while in 2007-2008 it was 79-80%. In addition to low capacity utilisation, the fragmentation of the market on the production side also continues to remain an issue.
The overcapacity is not expected to be reduced rapidly. ArcelorMittal calculates that installed capacity will remain above demand by as much as 60% this year. It should then reach 61% in 2020 thanks to the launch of some new investments involving, for example, wire rod production.
In addition to overcapacity, the market continues to be impacted by increasing imports despite the imposition of safeguard measures. Rebar and wire rod imports, for example, now account for over 10% of European demand, confirming that safeguard measures have not prevented imports as much as expected, ArcelorMittal notes. In 2018 rebar imports accounted for less than 8% of the total supply while wire rod was only slightly above 9%.
Overall imports of long products reduced compared with 2018 in the first part of 2019 (-26% year-on-year). This reduction was accompanied however by a new issue specifically linked with the flooding of the market with imported materials in very short periods of time. Rebar and wire rod quotas for Turkey and Russia, for example, were exhausted very quickly after they were assigned, confirming that European mills face waves of imports disrupting the normal flow of the market.
Looking forward, Sengupta notes that ArcelorMittal believes the second half of the year should be slightly more positive than the first part, overall. He nevertheless says that a recovery might not be seen immediately in July, but could come later on in the second half of 2019. He believes that for long products, the current downturn in Europe is 70% created by sentiment, while only 30% is based on real reductions in consumption.