German Distribution: car-buying incentive scheme could be required to stimulate sales in the coming months

European hot-dip galvanized coils dropped Wednesday with demand from automotive sector slow to return, sources told S&P Global Platts.

A Nordic-based buyer said if the automotive industry continues to restart gradually, prices would fall.

“If the automotive industry continues at this low pace, prices will drop further – production is not at the same momentum as it will be before coronavirus,” he said. “Who’s going to want to own a car at this point? But they [car manufacturers] need to keep on producing – it’s expensive – I think that we are talking about a number of millions losing every single month that they are not producing. People are already holding their orders back and not going through with the ones that they have,” he added.

A German distribution source said the automotive was enduring some structural problems.

“West European mills are looking to jump back into a normal market – but consumption is down,” he said. “Every end user is afraid of their salaries being cut, no one wants to buy a car right now. The automotive needs government help, between €3000-€4000 per ton. The export automotive market will also suffer because coronavirus is everywhere.”

A car-buying incentive scheme would be required to stimulate sales in the coming months, a second German steel distributor said.

“The automotive companies are back but at only one out of three shifts and the general public will need cash incentive to consider buying a car now,” he said.

Environmental groups would likely push that any government funded incentives would favor electric/hybrid vehicles in order to accelerate the transition away from gasoline or diesel vehicles, the source said.

One Italian mill source said there was “more pressure” on hot-dipped galvanized steel given restarts from the automotive industry have been slow to pick up, and mills eager to get rid of rising stocks.

“Mills are really trying to sell this product, the forecast is that in the second half of 2020 things will be more difficult and prices will drop further,” he said.

An Italy-based service center manager said that demand in HDG would increase after the lockdown in April saw demand plunge, but longer longer term the sector would struggle.

“Coming from a level of zero in April, automotive demand will increase,” he said.

Demand for HDG from the construction sector would increase going forward as governments increase infrastructure spending to create jobs in Europe, the source said, adding that he was looking for HDG to drop under Eur500/mt basis EXW Southern Europe in the short term.

The Platts TSI HDG index was assessed at Eur545/mt ex-works Ruhr Wednesday, a decline of Eur15 week on week.

In Southern Europe, HDG was assessed at Eur505/mt ex-works S. Europe, slipping Eur5 week on week.

— Len Griffin, Amanda Flint