EU flat steel producers expected to trim Q4 output to balance supply, demand

Further reductions in EU steelmaking capacity are expected in the fourth quarter of 2023, when mills attempt to rebalance the oversupplied HRC market, sources told Fastmarkets on Tuesday September 26.
European flat steel prices have been under pressure from a lack of demand in recent weeks, with buyers abstaining from making purchases amid slow downstream sales and bearish expectations.

A deteriorating macro-economic situation in Europe, coupled with an expected influx of steel imports into the region in the fourth quarter were the key factors putting pressure on domestic steel prices, sources said.

Fastmarkets calculated its daily steel hot-rolled coil index domestic, exw Northern Europe, at €628.08 per tonne on September 26, down by €3.80 per tonne from €631.88 per tonne on September 25.

The index was down by €6.92 per tonne week on week and by €15.67 per tonne month on month.

Apart from slow end-user demand, market participants said they were waiting for the start of the new import quota period on October 1, to better gauge the situation regarding HRC shipments to the EU.

“There are significant tonnages of imported HRC sitting in European ports, awaiting the new safeguard quota period. It is likely that those volumes will put downward pressure on domestic European prices once they [are released],” a trading source in Germany said.

Market participants said they estimate imported HRC volumes of between 500,000 tonnes and 1 million tonnes in October.

But some sources said that the impact of an influx of imported material on domestic HRC prices will be less significant than expected.

They said that much of the imported HRC was booked at the end of the second quarter – when the gap between domestic and import prices was more than €100 per tonne – and domestic prices have fallen significantly since June, so the gap will, ultimately, not be that dramatic.

By way of comparison, Fastmarkets’ daily steel HRC index domestic, exw Northern Europe, averaged €692.69 per tonne in June, while the monthly average for August was €643.86 per tonne, and prices have been trending lower through September.

Getting the right balance

Sources also said that, considering the weak end-user demand and limited hope for a price rebound this year, the logical step for the European mills would be to trim output to balance supply and demand.

But most agreed that the effect of the various shutdowns would only start to show in the first quarter of 2024.

“The only thing the European mills could do to shift the balance in the market [in the near term] would be to reduce their own output and take a more unified approach to pricing – because we still can see some producers making panic sales at quite low prices,” a trading source said.

“If producers gradually start switching off furnaces now, we might see a [price] rebound in the first quarter of 2024,” he added.

Some capacity has already been taken offline in Europe during the third quarter and some further stoppages have been announced for October 2023.

Notably, Europe’s leading steelmaker, ArcelorMittal, announced some equipment stoppages at its mill in Bremen, Germany, in the week to September 22. It said it will be halting blast furnace (BF) No2 on October 1 for about 30 days, while BF No3 will be subject to a five-day outage from October 9.

ArcelorMittal Bremen’s two BFs have a combined capacity for 3.6 million tonnes per year of pig iron and the Bremen steelworks also produces hot-rolled, cold-rolled and galvanized coil.

The company also started maintenance at its 2.35-million-tpy BF “A” at Gent in Belgium in mid-September, with repair works scheduled to last until the end of November.

ArcelorMittal Gent has two BFs with a combined capacity of around 4.35 million tpy of pig iron. The Gent steelworks also produces hot-rolled, cold-rolled and galvanized coil.

Salzgitter, one of Germany’s leading steel producers, idled its 2-million-tpy pig iron BF “A” for relining from August 14.

Sources said that production lost from the planned relining of BF “A” would be compensated through the stockpiling of slab delivered from other companies in the group, as well as by the restarting of its 800,000-tpy pig iron BF “C”, which has been idle since 2019.

Published by: Julia Bolotova