EU restocking to support prices, China unpredictable: panel

Flat steel prices in Europe will be supported by blast furnace mills cutting production amid losses, which will spur buyers to book product for first-quarter delivery. However, China remains an unpredictable element that could destabilise the current price floor. So said participants at Kallanish Flat Steel 2023 in Istanbul last week.

Demand is more stable than expected, said Mario Borsese, co-founder & managing partner at DP Trade, adding that stockists have adapted to keeping low inventories after the lessons of 2022. The lead times of producers determine the market trend. European BF mills are “losing massively” today and, since China is not cutting production, will need to reduce output to survive. This will spur a wave of buying for January and February delivery, Borsese commented.

Vogel Stahl owner and director Friso de Vries agreed that prices have bottomed but cautioned: “We’re currently protected by raw materials prices which are putting a floor under steel prices and preventing mills’ margins from diminishing.” But much depends on China, where building permit issuance is down 20% this year. “That’s the future pipeline for construction steel demand. So, I don’t feel very comfortable, not yet,” he added.

ArcelorMittal Flat Carbon Europe head of operational marketing & pricing Bart Staelens pointed out customers have learned to live with lower inventory levels, to limit the impact of shocks. “We do not see a crash in demand,” he observed. The displacement of Asian steel tonnages to Europe, amid rising Chinese exports this year, “shows the safeguard system is not creating a structural supply shortage in Europe”, he added.

Yildiz Demir Celik deputy general manager commercial Selçuk Yilmaz meanwhile said post-earthquake reconstruction still represents a big steel demand opportunity in Turkey. However, this is likely to materialise only from 2025 once the economy recovers.

On the topic of the Carbon Border Adjustment Mechanism (CBAM), Borsese was adamant it will forever change steel trade from 2026. For Chinese BF investments across Asia, the EU will no longer be a destination market – “it will be over”, he noted. This also goes for Indian steel, which currently has a big presence in Europe.

Ian Roper of Kallanish Consulting Services said CBAM is sure to lift the consumer cost of steel. It will hit manufacturing sectors in Europe with still higher input costs amid already high energy and carbon costs.

While there are still many aspects to be improved about CBAM, it is necessary to create a level field in Europe, added Staelens. The demand by society to improve the climate is growing. “Customers are starting to understand what is the value [of low-emission steel] for them. And they are ready to pay a premium,” he concluded.

Adam Smith Poland