European Steel Prices Plunging Due to Halted Demand Outlook
- 24-Jun-2022 6:00 PM
- Journalist: Patricia Jose Perez
Frankfurt Germany: European Steel prices are falling due to inadequate demand from the downstream manufacturing industries, after the offers witness’s tremendous gains after Russia started a full-scale invasion over Ukraine. Market players cite that the augmented stocks throughout the supply chain soared amidst the panic buying activity in the starting of the second quarter.
The decline comes after Europe's economy slows, with high commodity prices and inflation crimping consumer spending across the continent, followed by the concerns raised about disruptions in Russian and Ukrainian Steel exports after the war broke out. Service centres and factories rebuilt stockpiles, to reduce the need for consumers to purchase products at historically high prices.
Although the gyration in upstream energy cycle forecasting further increment in the producers offers instigated a lower purchasing trend followed by a persistent fall in the pricing trend during the second half of the Q2 2022. Domestic players aware of the further price erosion therefore the service centres and distributors resisted purchasing and supporting the wait-and-see sentiments in the spot markets. The domestic suppliers anticipated about the supply shortage to prevail, against the seasonal hype from the building and construction activities across the European region.
Steel prices in Europe had fallen to levels last reported before the extended Russia-Ukraine conflict. However, the rate and magnitude of the declining trend caught many market participants off guard. In March and April, market participants purchased additional tonnes to cover any potential shortfall caused by the Ukrainian war leading to sufficient inventories volumes against the dull demand amidst the peak season.
Currently, buyers have postponed their purchases as the pricing trajectory started to slide on a downtrend. Inventories were sufficient across the supply chain amidst the pause in purchasing activity supporting the wait-and-see sentiments across the European region. Although it is expected to continue until the prices stabilize. However, European Steel manufacturers sourcing key raw materials from alternative sources providing a window to keep the production ongoing. European steel mills began to seek orders from overseas markets as production schedules deteriorated and market players were seeking to maintain minimal netbacks. In response the transaction values fell faster and more dramatically for coil products than for long products in the European market.
The decreased automotive sales led reduced demand came as another setback to the European Steel producers, declining purchase activity has further shrunk the June offer book. Meanwhile, to attract new inquiries and compete in the overseas market, the producers reduced their quotation prices. However, the contractual delivery lead times further heightened the market uncertainty. However, long delivery times, the risk of tariffs, and capacity shortages at local ports, keep the interest limited. Other factors impacting the market's interest are uncertain demand and price directions.
As per ChemAnalyst, "The declining Steel prices may spur pent-up Steel demand and alleviate concerns about a lack of construction orders." Also, the relaxation of the COVID-related lockdown policy in China, combined with a trigger package, should boost raw material demand, supporting steel prices. However, the rising inflation rate in Europe threatens domestic consumption. High food and energy prices will reduce the demand for Steel products.