Steel supply tightness in EU to linger, auto to boost 2021 demand: Jefferies

Steel supply is expected to remain tight in the European steel market in the first half of 2021 as automotive demand will boost demand, although levels will only catch up to pre-pandemic levels by 2022, according to an analysis by equity research firm Jefferies.

In a note published Dec. 10, Jefferies said the continued supply shortage will likely lead to higher steel prices. The carbon steel market is expected to outperform stainless and OCTG in 2021.

The report described 2020 as “the most disruptive year since 2009, with ex-China apparent demand declining an estimated 13%.”

“The stimulus and V-shaped recovery put it at odds with nearly every other market, growing an estimated 8% in 2020 to leave global demand down 2%,” the report said. “We forecast a more synchronized rebound in 2021, albeit one where China lags.”

Jefferies is forecasting European demand to rise 8% in 2021, led by a 15% recovery in automotive. However, the car industry is likely to reach 2019 levels only in 2022, it said. Construction, the biggest end-user market of steel in Europe, is expected to grow by 5% next year.

The anticipated announcement of preliminary antidumping duties for Turkish HRC imports into the EU, which accounted for 28% of the EU’s 2020 HRC imports so far, is expected to tighten the supply situation further.

HRC prices have surged more than Eur200/mt in Europe since June, according to S&P Global Platts indexes EXW Ruhr and Italy, with sources reporting severe supply tightness on the spot market as mills offer limited material due to production curbs and scant availability of import material.

— Laura Varriale