The S&P Global Eurozone Manufacturing PMI fell below 50 in July 2022 and has been declining for eight consecutive months. Many stainless steel consuming industries are expecting an overall decline in production this year compared to 2022. The construction industry is hampered by high interest rates. Automotive production remains below forecast levels.
However, the growing need for domestic energy security in Europe is leading to an increase in steel consumption in oil and gas projects. Buyers also report an acceptable level of activity in chemical and pharmaceutical supply chains.
Stainless steel stocks across Europe have begun to decline. However, destocking is taking longer than most distributors expected due to weak demand. Buyers remain reluctant to make any long-term purchasing decisions and prefer to source material from existing inventory where possible.
Consequently, orders from European factories are low and delivery times are short. Market participants report that both long and flat steel producers are looking to sell and that prices have been significantly reduced this month.
Average contract value for 304 cold rolled coil in March is 2,939 euros per tonne, which is a 22-month low. The equivalent price for cold-rolled coil 316 is about 720 euros per tonne less than the alloy surcharges published by the mills for March.
Local producers of long products are forced to reduce the gap with import prices for commercial material. The difference between current European prices and Indian offers is more than 1,500 euros per tonne of 304 hot-rolled bars, excluding applicable duties.
It is unlikely that price cuts will lead to a significant increase in buying activity while maintaining high stocks, especially hot-rolled and cold-rolled flat rental. Buyers are concerned that price cuts will further depreciate their existing inventory.
Competition between distributors is strong and resale prices have also fallen. Most market participants expect both price and demand conditions to remain challenging throughout the second quarter.
