European distributors and service centres for steel continue being concerned over the availability of steel supplies from mills and the impact of the jump in prices.
In recent weeks a number of market participants have voiced their concerns. Most believe the tight availability of steel supply will continue at least until the end of the second quarter.
Clisson Groupe, a large French steel distributor, issued a letter to its clients in December to explain the problems faced due to difficulties in finding material from its suppliers and the rapid steel price growth. The company noted that the situation should not normalise at least until Q2. It added that while the tight supply was mainly for coil products originally, it then spread into all other categories, including sheet, tube and longs.
A service centre in the Benelux confirms this view. “Supply and demand became completely out of balance,” it notes. “Previously, there was more supply than demand, but the situation has now been drastically reversed.”
The Benelux source adds that there are rumours some European service centres could be forced to introduce reduced working hours due to the shortage of supply in the market.
Various sources say the tight supply is due to drastic production cuts applied last year by European mills in response to the pandemic. These, together with new trade barriers and a faster-than-expected demand recovery, have created the current problems.
According to the World Steel Association, monthly EU28 crude steel production returned to above pre-coronavirus levels for the first time in November 2020.
The situation is complicated further by the rapid jump in steel prices, which has given the upper hand to domestic mills that can renegotiate existing long-term contracts if needed to secure higher levels. According to the Kallanish price series, HRC transaction prices in northern Europe have jumped by over 68% since July 2020.