European HDG market stabilizing as automotive demand softens

The European HDG market was stable June 9, with customers now acting more cautiously as prices have now reached their peak, with more buyers are weary of sitting on overpriced stock. Mills were still having production difficulties amid working through large backlogs and contending with imminent maintenance periods, sources told S&P Global Platts.

Automotive manufacturers were heard to be producing less due to the ongoing semiconductor and microchip shortages, with many previously agreed volumes now being allocated to other buyers in desperate need of material. The softening in demand from auto has been welcomed by some, who are now able to receive material for as early as December, compared to the usual Q4 lead times of January 2021.

One German distributor was confident there would be no automotive shutdown, with the semiconductor supply issues expected to be resolved by next year.

“There will still be a need to restock, but the semiconductor issue will be finalized, until next year I don’t think they’ll shut plants down,” the distributor said. “We still see standstills at Ford, Audi for the summer, but we’ve heard the 16 largest producers for cars had the best results ever in the first quarter of 2021, so they’re not suffering.”

The same source stressed that supply shortages were not only evident on coils, but across the entire supply chain, particularly for packaging materials like wood, paper, and plastics.

“We are short on all material, wood, paper for packaging. What’s going to be the situation for the whole supply chain in the second half of the year?” the source said.

Discussions for new procurement were now heard to be going ahead for January-February.

“We have time because tonnage for this year is already booked, and there is no real volume for trading. Everyone is waiting for custom clearances at the port, and we’ll see mills coming out with volume for next year,” the same distributor said.

In Italy, a distributor source added that he was also treading cautiously with original equipment manufacturers due to the incredibly high prices for HDG in Europe.

“It’s just a matter of which level the final OEM is able to except. The price level is so high and there is now a huge gap in prices between the USA and the EU.”

Despite the current slowdown in auto demand, the source said he was certain that producers would return from September onwards with requests, spelling a “good Q4.”

— Amanda Flint