Sluggish European wire rod consumption is expected to persist this year, with steelmaking and processing sector sources indicating a lack of recovery signals.
Southern Europe steelmakers are reducing output en masse, to balance demand and supply. A northern European producer is also reportedly in the process of significantly cutting production and is contemplating mothballing one of its plant for several months.
European prices are stable, despite steelmakers needing to improve margins. The market has experienced persistent stagnation over the last eight months, marked by low order volumes, higher production costs, robust scrap prices, and rising energy levels.
An entire year like this, with limited consumption and high costs, would be “a disaster” for the upstream sector, according to two Italian mill sources who spoke to Kallanish. “Steel producers are under pressure to raise prices; on the other hand, our customers downstream are requesting reductions,” a wire rod processor says. “Italy is currently experiencing its 22nd consecutive month of declining industrial production.”
A major EU steelmaker is reportedly evaluating a potential price increase of €50/tonne ($51.2) for drawing-quality wire rod for the second quarter. “Downstream prices are showing weakness. How can consumption be reactivated? No one knows and there are no indications of recovery other than temporary restocking patches,” the processor says.
“Even if the war ends in Ukraine, we will need at least a couple of years to restore normal prices and flow of cheaper energy and raw materials. The United States is currently selling energy at a price that is five times higher than what was previously paid by European nations before the war, and it’s in their interest to maintain this situation,” a mill source comments.
A crisis is temporary, he explains. However, the European industry has been experiencing a structural transformation for years, with the exception of 2021 and 2022. Production has been falling amid declining consumption.
“During the 1990s, Europe produced 200 million tonnes. Now, we are scarcely able to reach 100,” the mill source continues. “Italy’s production did not even surpass 20mt last year. This is not a crisis. This marks the end of a system. The factors that contributed to the strength of Germany, such as the availability of inexpensive energy, will not be re-established. We must adapt to a new way of operating that involves diminished profits and volumes. Making steel in Europe is no longer sustainable.”
“Europe will not abandon its ETS standards, and politics does not intend to ensure the industry’s survival in the face of competition from the United States, China, and India. The environmental objectives of the European Union are unattainable. It is impossible today to identify any elements that would indicate a potential recovery,” he concludes.
Although wire rod derivatives saw acceptable consumption and prices last year, with relatively lengthy lead times and minimal imports, standard wire rod consumption and prices have significantly reduced in Europe.
In the most recent negotiations for Q2 sales of wire rod derivatives, the processor source says prices were not the primary concern, as companies are busy trying to survive. Buyers are aware that steelmakers will not reduce prices due to high costs, and processors are aware that they cannot request price increases in this market. Consequently, wire rod derivatives and standard wire rod levels should remain stable.
Drawing-quality wire rod prices in Italy go from €600-630/t delivered depending on volume. Northern European material also remains unchanged amid low demand. Domestic transaction values for drawing-quality wire rod are at €620/t ex-works and mesh-grade wire rod is at €610/t. Producers are asking for €625/t ex-works, on average, for mesh-quality rod.
Natalia Capra France