As delivery times for coil keep stretching, and mills appear to be extremely well-utilised, consultant Andreas Schneider addresses how this corresponds with sluggish steel demand. German consumption this full year is estimated to be barely 30 million tonnes, which is the lowest in 11 years.
Supply and demand have been out of sync for several months now, and what looked like a temporary phenomenon in summer has continued into autumn, Schneider writes in an article on his website Stahlmarkt Consult.
“The question here is to what extent the mills are deliberately keeping supply tight in order to strengthen their starting position for price negotiations,“ he says. The technical reasons often cited as the reason for the slow increase in production in the complex process of blast furnace control are convincing for a period of some weeks, but not over many months, he argues.
One explanation is that inventories were drastically reduced during the first Covid-19 lockdown period, so that the current need for restocking is driving repurchasing activity beyond the demand of downstream users, Kallanish understands. According to the statistics office, order intake at mills in August were approximately on the previous year’s level, although there has been not much of a recovery at industries like pipes or mechanical engineering.
Especially in view of the forthcoming contract and price discussions for 2021, many market participants are wondering how long the unusual situation will continue, Schneider writes.