Prices for metal products in Europe are recovering

In recent weeks, steel prices in Europe have recovered slightly, after which they continued to decline in October. Inflated energy prices have strengthened producers' resolve to stem the downward trend.

The announcement of a new quota-based steel trade agreement between the EU and the US, although not detailed, boosted the confidence of the mills. However, purchasing activity remains weak.

A number of manufacturers have switched to work at night and on weekends to reduce energy costs. Others have launched maintenance programs in response to the drop in orders. Despite this reduction in output, delivery times for all steel products are shorter.

Distribution chain stock levels are high. A shortage earlier in the year led to additional orders being placed to secure supplies. They are being delivered now.

Port warehouses are filled with imported steel, and operators refuse to accept new shipments until the old material has been collected. This is forcing distributors and service centers to lower their selling prices in order to free up space in their warehouses. However, with the end of the year approaching, companies are faced with a dilemma: reduce inventory levels without compromising annual financial results.

Prices in other regions are falling. In the United States, declining auto demand and a seasonal surge in imports have driven transaction costs down to ten percent from their previous highs. Domestic prices in China fell to twenty percent due to weaker demand for construction and deteriorating market sentiment. This has not yet led to an increase in exports from the Asian country.

Automatic deceleration

Car activity in Europe remains low. This increases the pressure on the producers of flat products. The factories are looking to develop partnerships in other sectors to compensate for the move away from the automotive segment. It remains to be seen if they will maintain that relationship when the auto industry revives.

Long products prices more than returned to their previous positions last month. The traditional electric arc furnace supply route has been heavily influenced by rising energy costs. Expected electricity surcharges helped stem the fall in prices. However, very few manufacturers have successfully implemented such surcharges, preferring to increase the base cost.

The downturn in the automotive sector is also affecting the demand for wire rod. Lower component sales and increased inventories have resulted in lower purchasing activity. This is the case for steel mills that see gaps in their production programs.

COP26

At COP26 at the United Nations, representatives from many countries pledged to phase out the use of coal. Since coal is used as a raw material in primary steelmaking and as a source of electricity for secondary smelting, this decision will have a significant impact on steelmaking.

Private and semi-private initiatives are already underway in the EU to find a solution. Faster phase-out of fossil fuels will require government support packages. Measures such as border taxes on carbon emissions will only work if Europe is ahead of technological advances in competing regions where government aid may be more expected.

The shift to cleaner production methods is also driven by consumer demand. Some firms already include green steel clauses in their sales contracts. The availability of green steel is extremely limited. Some vendors offer carbon offset certifications or "clean zero steel" instead. They all attract a premium that supports substantial further investment.