Q1 2023 steel demand, price direction unclear, more output cuts needed

The end of 2022 and the beginning of 2023 look blighted with uncertainty due to high energy costs, inflation and a new green deal, participants at the European steel distributors’ association Eurometal Regional Meeting event held in Milan told S&P Global Commodity Insights.

Service centers and large distributors were suffering due to margins being squeezed by record high raw materials costs and high stocks, that could reach as high as four months, a source said.

On the sidelines of the event, Paolo Sangoi, president of Assofermet Acciai Flat, told S&P Global he had registered volumes of 10% less in January-August compared to a year ago, with demand starting to slowdown noticeably in June an in Q2 and Q3 dropping 15% year on year.

Andrea Gabrielli, chairman of Gabrielli Group, one of the largest independent service centers in Italy, said in his presentation that July, which was usually a good month, saw some of the weakest demand in history.

In Italy, service centers usually consume or transform around 7 million mt/year of flat products.

“In the new year the main concern is that we will see the effect of higher costs on citizens that will not have enough money to buy goods,” Sangoi said.

Longs products were expected to do better, triggered by European Commission infrastructure funds, while the automotive sector was still suffering.

Output cuts needed to restore margins

Productions cuts already made by some steelmakers were still not enough, market participants said, and more stoppages were needed to make the industry profitable and sustain steel prices that were suffering due to high energy costs and lack of demand combined with high stocks.

Cesare Viganò, managing director of ArcelorMittal CLN Distribuzione Italia, said during a panel discussion that not only was the need of further cuts being echoed by many at the event, but these cuts should have taken place earlier.

Participants were particularly surprised by the lack of production cuts in North Europe, where prices had been lower than in Italy since the beginning of September, something that’s rarely happened.

Platts assessed hot-rolled coil in Northwest Europe at Eur745/mt ex-works Ruhr Sept, while HRC in South Europe was assessed at Eur760/mt ex-works Italy, down 19.2% and 9.1%, respectively since the start of 2022, according to S&P Global data.

— Annalisa Villa