HDG market participants uncertain about strong auto comeback in Q1

European hot-dipped galvanized steel prices softened Dec 22 as the market contended with hand-backs from automotive manufacturers amid the semiconductor shortage and the uncertainty of prices in the new year. Sentiment remained mixed about how quickly automotive demand would return in Q1, with some on the buy side still apprehensive to book if lower prices could be on the horizon, sources told S&P Global Platts.

A German distributor said mills were still trying to lock in key business by handing out discounts and added he did not consider the return of automotive demand to be a strong point for the new year.

“Mills are really under pressure to fill order books,” the distributor said. “For auto, it’s not the problem of microchips — it’s a problem of our future. Auto will never come back to their own strengths before this crisis because more countries are ruling that electric vehicles will be the future. They won’t need the same amount of steel; demand will go down.”

In the Italian market, a service center source was still skeptical about the strong return of the auto industry in Q1, despite chatter that major car manufacturer Stellantis was looking to restart production in the near term.

“No movement in automotive, no strong demand,” he said. “Stellantis are starting to allocate production, but not sure if this is the case.”

Others were more optimistic about a bounce-back, with some sources expecting a strong rebound in automotive demand and prices in Q1.

A European mill source said his forecast for Q1 was mostly focused on securing March orders with a “much better view” on automotive demand. The source confirmed that several OEMs had already announced more working shifts because of an easing in the shortage of auto components.

“Stellantis announced microchip and semiconductor issue is better for them,” the mill source said. “January is already better and am expecting peak demand.”

The source added that last week at a conference, a car manufacturer confirmed the restart of night shifts after Jan. 3 because of more availability of components.

“Auto has been low during the last quarter and it hit the mills — auto represents 20% of total production,” the same source said,

“Should they shut down completely or make discounts? That happened, but it’s over now,” the source said, highlighting bullish expectations for 2022.

— Amanda Flint