German steel producers, traders, and buyers expect price and production levels to weaken slightly in May with inventory sentiment mixed, S&P Global Commodity Insights monthly steel sentiment survey showed.
The pricing index stood at 42 for May, suggesting a bearish market sentiment, compared with April’s reading of 75.
Flat steel down in April, long steel stable
Flat steel prices fell over Eur100/mt on the month in April, while long steel prices were fairly stable. Participants were in a wait-and-see mode in the month due to muted demand and uncertainties created by Russia’s invasion of Ukraine end-February.
Buyer inventories decreased in April, with service centers and distributors preferring to sell from existing stock. Mills reported gaps in their orderbooks due to minimal demand and cancellations from key industries, including the automotive sector.
Demand was dull across the flat and long steel products during the month, with the Easter holiday reducing buying interest. Limited demand from end-consumers, uncertainties because of the war in Ukraine, sanctions on Russia, disruption of traditional supply chains and sliding import offers led the bullish trends to relax overall in April and even reverse in the flat steel market.
However, mill sources said rising production costs had put a potential floor under falling prices, as energy, logistics and raw materials drove input costs higher. Many participants interpreted the weakening prices through April as a sign of market stabilization rather than a correction. Some sources said they expect prices to “bounce back” later in the year.
“It’s important to remember these reductions are from record highs, following a historic rally,” said a distributor source. “A slight weakening isn’t unexpected; we see it as a stabilization rather than a correction. Prices may bounce back.”
May sentiment about inventories mixed, production weak
Producers were more bearish about prices in May with an index score of 40, compared with buy-side respondents at a reading of 44.
“We’re expecting EU domestic long steel prices to remain largely stable over May, but perhaps with some small corrections,” a Benelux-based distributor said. “Mills have a good order book. They are fully booked for May rolling and have no real import pressure.”
Producers and buy-side sources expect production levels to remain largely stable or slightly lower in May at an index score of 40, up 11 points from April.
Energy costs are the primary concern, with sources citing mills’ preference to reduce output over price cuts. Sources said they are worried about dramatic losses in production if Russian gas supply to Germany is cut off like Poland and Bulgaria.
Respondents had mixed expectations about market inventory levels. Buy-side sources scored 60 on the index, suggesting an inventory build in May, particularly among flat steel respondents, while producers expect a decrease at 31 points.
Long steel producers were comparatively more pessimistic about inventory levels in the month.
Buyers may look to rebuild depleted stock in May and order material for third-quarter coverage, while producers expect buyers to continue to exhaust inventories.
Sources said they expect prices to stabilize at a more acceptable level for buyers in May, as they look to restock.
— Benjamin Steven, Maria TanatarRabia Arif