Low-priced longs imports, weak consumption concern EU mills

The lower prices for imports of many long products such as rebar, wire rod and merchant bar from third countries into the EU and Italy, in particular, are concerning European producers. The trend is lowering customers’ price expectations in an already depressed market.

This is being exacerbated by Eurofer’s “awkward silence” and will cause a cumbersome issue for the entire steel sector in the medium term, a senior Italian mill source tells Kallanish.

Competitive import offers of long products from foreign mills or offered through traders have again become a topical subject with buyers turning to import purchases. The current high costs of production in Italy are making local steelmakers uncompetitive against lower import quotes from third countries.

“We are faced with a transversal slowdown in consumption in many sectors downstream, particularly in construction, with the automotive industry representing the only exception thanks to its good order books for Q2. In parallel, producers continue to grapple with the cost of energy and scrap that remain two times higher [compared to pre-Ukraine war levels],” the source says.

“Despite the recent price reductions, scrap also bears a price level disconnected from the downstream reality and too elevated considering the selling price of the finished product,” the source continues. “Values for longs and derivatives such as mesh, for instance, have reached a level that makes no sense, in some cases below cost of production. We hope that the inevitable production cuts will give an impulse in the coming weeks to some restocking resumption downstream in June and July. However, if real consumption recovery does not happen downstream, the apparent demand resumption could only be a short-term relief for the market.”

Italian consumption seems to be more resilient at present compared to other European nations. May consumption levels are 20% lower than the level of sales volumes expected at the beginning of the month. The situation in the German market, “the driving force of Europe”, appears to be truly critical, with the level of purchases in many cases falling to virtually zero in recent weeks. The construction sector in that country “seems to have completely stopped”, the source observes.

In other countries such as France, Belgium and Luxembourg, a similar situation of low consumption and poor construction sector activity is persisting. Mill sources in these countries report regular weekly production stoppages for all long products and a very limited appetite for material.

French construction federation Fédération Française du Bâtiment (FFB) reported slow activity in the first quarter. “The housing crisis, announced several quarters ago, is intensifying. Year-on-year in the first quarter of 2023, the collapse in construction permits accelerated further, to 31%, and the number of new building sites is really starting to feel the impact, with a drop of 12.5%,” FFB reports. Its president, Olivier Salleron, told local press a “catastrophe” is approaching and property developers are in a quandary (see Kallanish 5 May 2023).

Natalia Capra France