German steel producers, traders and buyers are bearish on pricing over June and are almost unanimous in their expectation that production levels will fall, according to data from S&P Global Commodity Insights monthly steel sentiment survey.
The survey saw traders and producers equally bearish on pricing, with the June index at around 20 points, down from around 42 points in May.
The market was experiencing slow demand for long steel products as buyers held back in expectation of further price falls. Most mill sources said demand was recovering but still below average.
“Customers are in wait-and-see mode,” one long steel producer told S&P Global Commodity Insights. “They will have to come back to the market. That is a matter of one week or two and then we can have a better idea about prices but for now they are holding back.”
Platts, part of S&P Global Commodity Insights, assessed TSI Northwest Europe Rebar Eur142.50/mt lower over May at Eur1,185/mt ex-works on June 1.
On the flat steel side, demand for coil products remained weak across Europe in May and the situation was unlikely to see any visible changes in June. Some market sources said buying interest had slightly improved, but was still slower than normal.
Steel demand from automotive industry had been undercut by continuing shortage of components. And other industries had also been less interested in flat steel.
Platts assessed TSI North European HRC Eur290/mt lower over May at Eur975/mt ex-works Ruhr on June 1.
German output lower
The production outlook edged lower from May with the index sliding 14 points to 26 for June, suggesting mills were in no hurry to produce. Steelmakers continued to operate at a low level of capacity utilization, amid high energy costs and low demand.
“Mills are planning on cutting production because of high electricity costs but I don’t think there will be a big change from April or May,” one long steel producer said.
On the flat steel side, however, against the expectation of market participants, steelmakers did not announce any production cuts. It was expected that the steel output reduction could have helped to balance weaker demand and supply. However, it is likely that the mills will make longer summer maintenances instead.
As a result, the rolled and semi-finished steel stocks of the steelmakers were expected to remain relatively high in summer.
Distributors, in the meantime, had sufficient stocks of coil and were holding back from making deals due to negative sentiment prevailing in the EU coil market, according to sources. Buyers’ stocks were on the higher side due to panic buying earlier this year, they said.
“For our customers, inventory levels are around normal levels, but if they are not going to buy they will end up depleting those inventory levels and they will have to come back to the market, it’s just a matter of when,” one long steel producer said.
The index for inventory sentiment stood at 35, suggesting that market participants expected stored steel volumes for June to be low, compared to an index of around 46 points in May. Traders agreed that inventory levels were expected to be significantly lower during June, with an index of 37.5 points, down from 60 in May. However, steel producers were largely firm on their stance on inventory levels for June with an index of 33, compared to 31 points. in May.
— Rabia Arif, Maria Tanatar