Steel market in Europe expects big production cuts due to weak demand
The end of 2022 and the beginning of 2023 look clouded by uncertainty due to high energy prices, inflation and a new green deal, attendees of the regional meeting of the European steel distributors association Eurometal in Milan told S&P Global Commodity Insights.
According to the publication, European service centers and large distributors have been hit hard by shrinking margins due to record high prices for raw materials and large inventories that could be as long as four months.
On the sidelines of the event, Paolo Sangoi, president of Assofermet Acciai Flat, told S&P Global that he registered a 10% decrease in volumes in January-August compared to last year, with demand starting to noticeably slow down in June, as well as in the second and third quarters. a 15% drop year on year.
Andrea Gabrielli, chairman of the Gabrielli Group, one of the largest independent service centers in Italy, said in his presentation that July, which was usually a good month, was one of the weakest in history.
In Italy, service centers typically consume or process about 7 million tons of flat products per year.
“In the new year, the main problem is that we will see the impact of higher spending on citizens who will not have enough money to buy goods,” Sangoi said.
Long-rollers were expected to sell better thanks to European Commission infrastructure funds, while the automotive sector is still depressed.
According to market participants, the production cuts already made by some steelmakers are still not enough and more shutdowns are needed to make the industry profitable and support steel prices, which are subject to high energy costs and lack of demand, combined with high stocks.
Cesare Vigano, Managing Director of ArcelorMittal CLN Distribuzione Italia, said during a panel discussion that not only did many of the event attendees support the need for further cuts, they also believe that those cuts should have been made sooner.
Participants were particularly surprised by the lack of production cuts in northern Europe, where prices have been lower than in Italy since early September, which rarely happens.