Prospects increase for coil production cuts in EU

As coil prices keep sinking and energy supply bottlenecks get more severe, mills will be inclined to cut back on output, northwest European market observers believe.

A shortage of orders “has already caused three European mills to reduce their production volumes or postpone the planned [re]start-up of production lines,” a Dutch manager cautions. Kallanish contacted some of those mills for verification but received no response.

In Central and Eastern Europe, US Steel Kosice did however respond, rejecting market reports that it was idling one blast furnace amid weak demand. “We proceed with the standard production,” its spokesman observes.

There is little prospect of increased demand within the EU in the short term, but rather the expectation of a still further decline in demand. In combination with ever-increasing production costs, it is not unlikely that more steelmakers will cut back on production, the manager believes.

Adding to this, Russian gas exports to Germany have been severely curtailed and may even be stopped altogether. The question is if German mills and manufacturers will still have enough energy at their disposal to be able to run their production normally. Federal economy minister Robert Habeck has already rung the alarm for emergency plans for such a scenario.

Thirdly, the manager underlines the risk of rising inflation which will mean a break on investment, which in turn means less need for steel. “This could cause a return of production overcapacity in the EU,” he says.

The seasonal effect of summer production breaks is imminent, another Dutch source points out. Given the circumstances, they are coming at the right time, and they could well be extended this year.

Christian Koehl Germany