Hot Rolled Steel Coils from Europe under price pressure in May 2020

Tuesday May 12th, 2020 | Francesco Grillo | Industry News

Pandemic Hits European Steel Demand and Prices. We can see the situation in the next chart, clearly prices are on the decline:

Source: Platts

If we expect a V shaped recovery, in this case, the V is inverted.

And this situation comes from the fact that, during March 2020, despite measures to combat the spread coronavirus, purchases of flat steel products continued at a high level. The Global Steel Users PMI index from IHS Markit was showing this clearly.

But not in May 2020 where suddenly PMI index, what includes information from purchaser managers, drop to a long-time low level. See the arrow. Probably we are reaching the down of the recovery.

Source IHS Markit

What happened with the car industry?

Demand from the automotive sector has been particularly poor, but the positive side it is that European automakers are gradually resuming production. In example Volkswagen is producing now around 6.000 vehicles per week. Daimler Benz, reopened starting in May its engine manufacturing plant in Stuttgart. Same case like Volvo, who reopened its main plant in Sweden few days ago. Car dealerships in Germany were allowed to reopen on 20 April. Italy is expected to follow early May.

What can we expect?

The resumption of production activities in Europe is only the first step toward business as usual for the steel market. A recovery in consumer demand and the reopening of most businesses would be necessary before to contemplate a complete resumption of production and recover the complex and often global supply chains. Unfortunately consumer sentiment will depend heavily on the duration and severity of the global economic downturn, and the real possibilities of a second wave of Coronavirus in autumn. The magnitude of the reduction in the steel demand is enormous as it affects virtually all sectors and products where steels are being used. For instance, we should remain cautious and we have to wait to evaluate the situation in deep because we have no role model in the past that teaches us the impact of such a crisis on consumer confidence.


Daniel Romero

This article was originally posted on Medium.

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