German fabricators regain optimism following initial pandemic shock

The economic impact of the coronavirus caused a -19.1% on-year drop in first-half-of-2020 production in Germany’s steel and metal working industries.

According to their association, Wirtschaftsverband Stahl- und Metallverarbeitung (WSM), the second quarter saw a relative recovery. While production in April was down -35.5% year-on-year, the difference by July had reduced to -16.7%, meaning a 25% rebound, WSM chief economist Holger Ade points out.

This development is also reflected in the sentiment of the member companies, whose expectations after a deep dive in April had returned to breakeven by the end of June, Kallanish hears. Ade notes that during the financial crisis in 2009, it took seven months before optimism recovered.

Utilisation at the companies, which had already dipped last year before the pandemic by 10 percentage points from 2018 to 78.1%, was at 68.7% in Q2. That figure is relatively high given the nearly complete temporary production stop at carmakers. WSM therefore believes the automotive lockdown has hit supplier firms with a delay, meaning inventories piled up in Q2 and production may have been kept low going forward.

For the full year, WSM expects an output drop of -12-15%. It emphasises that the dip in 2009 was considerably deeper, at -25%.