Service centers are de-stocking, not restocking
Domestic prices for European hot-rolled coil remained flat Sept. 18, as buyers focused on de-stocking material, and a largely pessimistic mood prevailed in the market.
“Service centers are de-stocking, not restocking,” a Germany-based mill source said. “There are very low volumes in the market, and all mills are suffering.”
Inventory levels in the market are running high, and macroeconomic conditions are worsening, leading to bankruptcies and a weak domestic market, sources said.
“Economy is not doing that well,” a Netherlands-based service-center source said. “There are a lot of bankruptcies in [the] Netherlands. The automotive sector is weak and customers are canceling orders. Germany is in recession due to automotive, construction sectors.”
Domestic European mills are in a dilemma, sources said, about whether to pursue market share by lowering offer levels, risk losing money by keeping prices firm, or reducing output and losing CO2 emissions allowances for next year.
“European mills are in a dilemma because if they don’t follow lower prices, they will lose market share,” the source said. “If they follow prices, they will lose money but have CO2 emissions allowances for next year. If they reduce production, they will lose this allowance, but maintain price level. I think eventually they will fire employees to minimize losses.”
Platts assessed Northwest European HRC stable on the day at Eur555/mt ex-works Ruhr Sept. 18. Offers were reported in the range of Eur550-580/mt ex-works Ruhr, from a buy-side source.
Platts assessed domestic HRC prices in Southern Europe also stable on the day at Eur555/mt EXW Italy, with offers reported at Eur580-570/mt EXW Italy.
Interest in imported HRC remains weak due to concerns around longer lead times and risks of safeguard duties. However, sources also noted that the safeguard measures have allowed other countries not subject to the measures to come in with competitive import offers.
“The quota cap system has allowed new countries such as Australia and Saudi Arabia to come to Europe,” the service-center source said.
Platts assessed imported HRC in Northwest Europe stable on the day at Eur545/mt CIF Antwerp.
Meanwhile, Platts assessed imported HRC in Southern Europe also stable on the day at Eur540/mt CIF Italy.
Steel Service Centers concerned about the impact of CBAM
Last Thursday, EUROMETAL’s “SSC Arbeitskreis” (Steel Service Center Working Group) brought together industry leaders from Germany, Austria, Netherlands, and Belgium. The somber mood reflected concerns over the impact of the Carbon Border Adjustment Mechanism (CBAM) on the future of European steel processing.
Over two dozen steel executives grappled with the current economic climate – both German and global – alongside pressing issues like decarbonization, energy efficiency, workforce security, and distribution challenges. However, decarbonization, particularly CBAM, dominated the discussions.
Customers Seek Workarounds, Threatening Service Centers
Suppliers from Asia are looking for workaround solutions and are threatening European metalforming industry and service centres and ultimately also the European steel mills.
Participants at the conference reported on the fears of the forming and steel processing industry (laser and welded components) regarding the future of European steel supply chains.
Scared by the impact of CBAM, some large customers (1st tiers) are looking for external alternatives outside European borders and opting to import ready-to-use steel products, in order to circumvent the regulation.
This trend deeply worries Service Centers, especially considering the current period of moderate activity. Already facing significant investments in decarbonization and cost optimization, CBAM throws another wrench into an already challenging situation.
The Need for Collaboration
Despite the gloomy outlook, the working group highlighted the importance of ongoing dialogue and collaboration within the industry. The active participation throughout the event underscored the need for such forums to navigate the current complexities and develop solutions.
The future of European steel processing hinges on the industry’s ability to adapt to the demands of CBAM while remaining competitive. Collaboration and innovation will likely be key to weathering this storm.
Looking Ahead
The positive spirit of collaboration continued beyond the discussions. The intention to repeat the event in spring 2025 has already been announced, with the German city of Bönen as the probable location. This commitment to ongoing dialogue bodes well for the industry’s ability to navigate the challenges ahead.
