A shortage of supply is expected to push steel sheet and coil prices in Europe in the near future to record highs, which may start falling in late August or early September, predict analysts of the British engineering agency MEPS.
The agency said the supply deficit is still growing. The delivery times of the factories are incredibly extended. The recovery in steel production remains insufficient to meet current demand. Some steelmakers report technical problems when restarting equipment.
Recent adverse weather conditions have limited steel production and supply in Europe, exacerbating the supply constraint. Consequently, steel prices in the European Union are forecast to continue their upward trend in April /June.
However, in the second half of 2021, a decrease in the cost of metal products is predicted against the background of the restoration of the balance between supply and demand.
The unprecedentedly high cost of steel creates significant financial pressure for many companies. This negatively affects existing projects and delays the start of new ones. Moreover, the automotive industry's demand for steel coils is projected to decline as a result of a shortage of semiconductors and low car sales.
However, the reopening of previously idle steelmaking capacities in Europe and around the world is in full swing. This should lead to an increase in supplies from local and foreign sources.
In addition to the increase in supply, in the second half of the year, a decrease in raw material prices is expected. The current price of iron ore at $ 165 - $ 170 per ton is considered volatile. In addition, mining companies are expected to grow significantly.
Despite the expected downward correction, coil prices in Europe and profitability are forecast to remain at historically high levels over the medium term.