The head of Metinvest Western Europe, Roberto Re, expects much healthier demand from Italian and wider European distributors in 2021. Inventory levels should gradually recover, which will contribute to increased apparent steel demand.
During the Kallanish Europe Steel Markets 2020 virtual conference on Wednesday, Re said European distributors have faced two tough years in 2019 and 2020. Reduced demand has forced them to cut their inventory levels to release some working capital and weather the storm.
The situation has deteriorated in 2020 with the effects of the global Covid-19 pandemic. Stockholders sharply reduced their purchases, reflecting the depressed level of sales to end-users. Consequently, inventories of flat steel products, already -20% lower year-on-year in 2019, reached extremely low levels by mid-2020.
However, the sudden re-emergence of demand from end-users, particularly the automotive industry, has forced the distribution sector to look for additional supply. This supply has nevertheless been reduced following drastic production cuts as a consequence of the pandemic. “Demand recovery in late 2020 will become a driver for restocking, which we already saw in November,” Re said.
He remains optimistic regarding demand for the next three years. In the short term the Italian market will see fairly strong apparent consumption, together with high prices. In the medium and long term, the future of the former Ilva, now ArcelorMittal Italia’s sales strategy and position in the market will determine any Italian market price development and supply.
EU safeguard duties ending in June will represent another important element for the Italian market in the medium term. Potential mergers and acquisitions for the main Italian players, such as Arvedi, Marcegalia, ArcelorMittal and also Metinvest, may also reshape the second-largest steel market in Europe, Re concluded.