German steel market sees stronger March prices on restocking, restrictive lead times

German steel market participants held bullish expectations for prices over March, data from S&P Global Commodity Insights’ monthly steel sentiment survey showed.

The March index for market sentiment stood at 75 points, with both distributors and producers scoring equally on the sentiment index. This is a large increase from February’s average of 54 points, indicating bullish expectations for the weeks to come.

“The market is cautiously positive, mills have the upper hand in pricing as they have full order books — sold out until June delivery,” a trader said. “Import offers are limited and only available for August. European mills claim that there will be restocking soon.”

Indeed, with the market now feeling the effects of widespread production cuts in the latter half of 2022, many attribute increasing prices to strong orderbooks and the anticipation of supportive demand, pushing delivery periods into June for the majority of European flat steelmakers.

“Expectations are that the prices [for coil] will be gradually moving up, without any major price jumps,” a service center source said. “European mills do not perceive all the import as a threat, the general feedback is positive with some rebound expected — no downward pressure in the coming week.

“There are no alternatives but to buy in the EU for shorter lead times.”

The lack of competitive import offers give European mills greater power in the market, with the limited offers available only from Asian origins for August delivery.

Evidencing these sentiments, leading steelmaker ArcelorMittal announced price increases across Europe for March trading, with other producers expected to follow the uptrend.

Supply and demand

Amid the likelihood of higher prices, respondents also expected an increase in inventory levels, suggestive of near-term distributor restocking.

The index for inventory sentiment averaged around 59 points for March, with distributors and producers scoring 62.5 and 56.25, respectively.

This is the first time the inventory index has scored above 50 points this year, indicating greater confidence that inventories are reaching critical levels, especially on behalf of producers.

“It seems that the buyers would need to restock in a couple of weeks and then the prices will rise,” a European steelmaker said.

“The last large volume bookings were in January, and since then buyers did not restock,” a German service center said. “They will have to book big volumes in the coming weeks.”

Steelmakers recently announced a spate of restarts across the European market, bringing capacities back online in the context of recovering demand.

The March index for production sentiment mirrored the inventory index, averaging 59 points on the same producer-distributor scores.

Most expected a slight increase, or stability of production, but the restart of some idled furnaces in March-April is not expected to have an immediate impact on supply and prices, according to market participants.

“It takes time for the mills to restart furnaces, and that’s if they do all restart,” a trader said. “If we do see restarts in March-April then additional volumes won’t hit the market until June-July.”

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven, Maria Tanatar, Rabia Arif