Growth in demand for flat products in 2019 could decelerate due to a slowdown registered in the automotive sector, senior industry analyst Georges Kirps tells Kallanish.
In 2018 so far, the performance of the flats sector has been positive, but the peak might have already been reached in the first part of the year. “The EU automotive industry is now rather in a decelerating mode with a slowing EU market and less brighter perspectives in export sales,” Kirps says. “Uncertainty in the automotive sector is on the high side as this market appears to have become a preferred retaliation playground for tit-for-tat protectionist battles.”
The executive also adds that Brexit could create some disruptions in the automotive supply chain going into 2019, leading to lower output in continental Europe. “I see a possibility of production disruptions and mainly severe turbulence in the logistics and transportation steel supply chains, which presently are already in a situation of stress,” Kirps says.
Whilst demand is not set to be as bright as in the recent past, Kirps also notes that the sector is set to continue changing rapidly in supply-side terms. “On paper, the remedies imposed by the EU Commission for the ArcelorMittal/Ilva merger would prevent a rise in the market share of the new entity, in crude steel as well as in finished and processed flat steel products,” Kirps comments. “Nevertheless, these same remedies may eventually have the consequence that new players may enter the EU flat steel market and start to compete with the establishment.”
Kirps is currently delaying any judgement regarding the ongoing Tata Steel Europe/thyssenkrupp merger, as the proposal is now with the European Commission. Many of the possible consequences of the merger will depend on the decision, and any possible remedies communicated, by the European authorities.