EU steel production outstrips demand

Steelmakers in the European Union should be careful when reopening capacity as the COVID-19 lockdown is eased as they risk creating a demand vacuum that will exacerbate downward pressure on prices, analysts and sources say. While factories continue to restrict production, they remain ahead of demand in Europe, they said.

During the market downturn caused by the pandemic, up to 18.9 million tonnes of offline steel production were shut down in Europe, and currently only pockets of production have resumed in countries including Italy, France and other countries. UK, in line with relaunches in the automotive and construction sectors.

In Italy, the EU's second largest steelmaking country with 23 million tonnes of steel last year and the first to officially resume steel production in late April /early May, mills operate at just 40-50% capacity. In Germany, the EU's largest steel industry, restarts may be slower: steelmaker Thyssenkrupp said it expects production to be cut by 20-30% of its capacity by the end of the summer, while Salzgitter plans to continue with production cuts amid bleak prospects for others. year.

With 39.7 million tonnes of crude steel produced in 2019, Germany's first-quarter steel production fell 10% year-on-year, and further declines are expected this month as more and more factories reduce working hours.

“The worst contraction in Germany's economy since 2009 is not the end of the current crisis,” ING Economics warned on Friday. "The second quarter will be more terrible." ING reports that the German economy contracted 2.2% in the first quarter from the previous quarter, albeit slightly less than the 3.8% contraction in total eurozone GDP over the same period.

“Producers have been careful not to put more pressure on prices by increasing production at a faster rate than renewed demand,” said Platts Phillip Price, Mettalex advisor at Fetch.AI, a decentralized commodity exchange. “The serious economic consequences of the blocking are only now beginning to become clear. ... While a gradual restart should support some improvement in demand ... with national deficit projections at unprecedented levels, discretionary spending is likely to be limited and central governments are likely to have limited remaining resources to stimulate demand for some time, ”he said ...

It is expected that some steelmaking facilities, for example in Poland, will not return to the market for several months.