EU prices to rise, imports fall further: Assofermet

European steel prices are likely to rise further in the coming months due to various factors restricting material availability coupled with a recovery in demand, according to Assofermet Acciai president Tommaso Sandrini.

The European steel market is in a state of panic, with participants perceiving there is insufficient material to satisfy demand. Many are questioning, “are we back in 2008?” Sandrini said at the Kallanish Europe Steel Markets 2020 virtual conference on Wednesday. European mills are fully booked for the first quarter, with some offering only limited April material.

This is the result of trade defence measures blocking imports and production being concentrated at a limited number of mills. Moreover, the Covid-19 pandemic has led to drastically reduced production, while consumption in recent months has recovered to pre-pandemic levels.

Almost all major hot rolled coil exporters into the EU are blocked, the safeguard revision earlier this year halved the available HRC quota, and the anti-dumping probe is preventing any negotiations with Turkish suppliers. “So, the main message is imports will go down,” even further in the coming months, Sandrini observed.

Ten blast furnaces meanwhile remain idled in the EU, meaning around 17% of installed capacity is unavailable. Regional production in 2020 will decline to even below 2009 levels.

The EU market has meanwhile been de-stocking since 2019 when it reduced inventory by 8 million tonnes, followed by a further 11mt expected in 2020. These two years together surpass the destocking of 16mt recorded in 2009. “So, the system is short of steel at the moment,” Sandrini explained.

Going forward, mills are likely to increase production significantly in the coming months, but the effects will not be felt before the second quarter. The expiry of safeguard duties or their extension in a “…lighter” format should allow for some import opportunities. The slowdown in automotive and white goods demand will be offset by higher construction demand, driven by EU stimulus measures.

In the longer term, the EU system of protection will have to be rethought completely, as it will be impossible for a carbon border adjustment to co-exist with existing trade defence measures, Sandrini concluded.