Spain’s steel sector remains cautious over market recovery

Spanish steel distributor representatives have expressed optimism that steel sector confidence will soon recover. They believe construction and infrastructure sector demand is growing progressively, although the energy crunch persists. Energy supply and high price concerns should remain over the summer, delegates told Kallanish on the sidelines of the EUROMETAL Steel Net Forum Iberia in Barcelona on Monday.

“We’ve had a post-Covid-19 recovery at a higher level than expected, but the global crisis resulting from the war in Ukraine has caused a tremendous setback to steel-using sectors,” one participant commented. “The sharp increase in energy prices has put most mills under pressure. All industries were bottlenecked, while small steel users and manufacturers were at the edge of bankruptcy.”

According to another Spanish steel distributor, the energy crisis seems to be under control thanks to the latest government measures. However, the Iberian electricity market is still at a disadvantage compared to other European countries and this represents a great risk to the competitiveness of local producers.

A representative from the construction sector, meanwhile, commented that most distributors are trying to recover their profit margins, which could delay the recovery of demand at a time when steel prices are turning down. “The effort to recover margins may have a negative effect in the short term. If distributors use the difference resulting from the current price fall to increase their sales margins, the adjustment will not be really passed on to end customers and thus the recovery of demand, activity and investment in the construction sector will be once again postponed,” he observed.

However, maintaining lower margins to support the demand recovery is difficult to apply throughout the distribution chain, since contracts are also influenced by other factors such as logistics, a service centre source explained.

Steel traders confirmed that rebar prices are turning down. Currently, Spanish material stands at almost €800/tonne ($853.5/t). Including €262/t size extras, transaction values are at €1,062/t ex-works. Some offers have also been heard at €1,000/t delivered for 16mm rebar.

Todor Kirkov Bulgaria