European flat steel market still suffering weak demand

European demand for flat steel coils remains weak, with any recovery expected to be gradual, sources told S&P Global Platts Monday.

“Domestic mills are not seeing a lot of business and there is no demand in Europe or anywhere else, so news that automotive sector is restarting is positive,” a German service center source said.

“But at what level of production is the question, as just one shift out of three per day on the automotive assembly lines will not take the volumes [of steel] the tier-one mills require,” he said.

“Everyone needs to decide now if they take domestic HRC on eight weeks lead time and higher price or import material, for 12 weeks plus lead time and lower price, plus the recent currency movements have started to move against imports.”

The source reported HRC from imports was offered basis CIF Antwerp at Eur385/mt.

“If the lockdowns continue, then prices can soften further from the current levels, the return to work will be gradual process, however, if this does not happen, then we will be in a much worse situation, reduced working means reduced consumption.”

A delicate balance exists between the need to unlock European economies while also ensuring there is no second wave of infections of coronavirus that could “wipe out the remainder of the year,” the service center source said.

An Italy-based service center source said that a lack of demand combined with price pressure from import material was driving the market lower.

“The first likely deals that will be done after the restart in Italy, will be around Eur390-400/mt base price, but nobody is willing to give exact prices,” he said.

“Sure there are imports in the market, however, the real pressure stems from a lack of demand, and imports volumes will be declining as demand falls, but at the moment there is no demand and therefore supply has not reduced to balance the market.”

“Import prices have to be at almost break-even level now for those non-EU mills, however, domestic producers perhaps can go another Eur20 lower,” the source said, highlighting that the spread between imports and domestic offers had room to tighten.

“The recovery will be gradual and step-by-step, there are negotiations ongoing and some small sales taking place already, however, next week will be much better as most people return to the market with urgent needs for metal.”

A second Italy-based service center source said that an immediate uptick in demand was not expected following the lifting of economic restrictions in Italy.

“Next week all the companies can restart, but I’m not expecting a sharp increase of activity. We have to wait until the third week in May to understand what could happen in the market,” he said.

The Platts TSI hot-rolled coil index was calculated stable Monday at Eur450/mt ($487.67/mt) ex-works Ruhr.

Cold-rolled coil was assessed at Eur531/mt ex-works Ruhr, slipping 50 euro cent lower day on day.

In Southern Europe, HRC was assessed at Eur425/mt ex-works South Europe, declining Eur4.50 from Friday.

— Len Griffin