German steel market expects production to soften, inventories to decrease

German steel traders and producers were unanimous in their expectations of production decreasing in April, according to data from an S&P Global Commodity Insights survey.

The current production disruption at several steel mills in Europe remains a major concern in the market for flat steel products. With the March 22 fire at ArcelorMittal’s plant in Gijon, Spain, and a March 30 fire at the company’s Dunkirk, France, plant, coil supply in Europe is expected to remain tight. ArcelorMittal in a March 31 customer letter said it might take “several weeks to get back to standard production levels.”

Amid the ongoing tightness in supply, sources expected production in April to fall month on month, data from S&P Global’s German Steel Sentiment Survey showed. The index for production outlook was around 45 points for April, down from 59 points for March. Trading sources and producers were unanimous in their expectations with an index of around 45 points, compared with indices of 62.50 and 56.25 points for traders and producers, respectively, in March.

On long steel side, most sources were expecting production levels to remain stable in April.

The overall index for German inventory sentiment fell month on month, reflecting the market’s expectation of lower inventory levels in April, with an index of approximately 42.50 points, compared with approximately 59 points in March. The index for steel producers for April was around 40 points, compared with 56.25 points in March. The index for traders’ sentiment stood at 45 points for April, compared with 62.50 points in March.

Market expects prices to strengthen

German steel traders and producers expected prices to trend higher over April; however, the expectation was less firm month on month, according to the survey.

The April index for traders’ sentiment stood around 65 points, compared with 75 points in March. The index for producers’ sentiment was also around 65 points, compared with a March index of 75 points. The overall index for prices was at approximately 65 points, down from 75 points for March.

On long steel side, some sources expected energy prices to increase in the near term leading to mills aiming for higher prices. Amid strengthened scrap prices in the region, sources noted that mills had already increased offer levels but were facing resistance from buyers who were holding back waiting for prices to stabilize.

The Platts assessment of Northwest Europe Rebar was down Eur10/mt week on week to April 5 to Eur700/mt ex-works. Platts’ assessment of European medium sections price (category 1, S235 JR) was up week on week on April 5 by Eur5/mt to Eur940/mt delivered. Platts is part of S&P Global.

Slow demand ahead of the Easter holidays and tight supply kept hot-rolled coil prices in the region rangebound showing a lack of significant movement; however, European steelmakers were aiming to achieve higher prices due to limited supply.

Platts assessment of North European HRC April 6 was up Eur5/mt on the day at Eur860/mt ex-works Ruhr.