European steel prices fell to pre-war levels

European prices for coiled steel continued to decline in May and early June. Service centers and distributors refrained from buying, fearing further price cuts. Mills was looking for orders in the face of declining demand.

By mid-June, coil prices in Europe had declined to levels reported prior to Russia's actions in Ukraine. This price correction was expected, given the rapid growth caused by the panic. However, the speed and scale of the decline took many market participants by surprise.

Additional tonnages were purchased in March and April to cover potential shortages associated with the war in Ukraine. These include orders placed at the peak of the market.

As soon as the downturn began, buyers delayed their purchases. Stocks throughout the supply chain were sufficient to allow for this pause in purchasing activity. This situation will continue until prices stabilize or restocking is required.

Decrease in demand for cars
Steelmakers continued to suffer from declining demand for cars. Order books have further shrunk due to a lack of purchasing from distributors. Factories have cut prices to attract new business. Delivery dates are agreed. These factors have added uncertainty to the market.

The automotive industry reports that its level of activity will recover in the second half of this year. However, many participants are skeptical. At the same time, the underlying values ​​of the coils remain under downward pressure.

Prices for long products also underwent a downward correction. However, the movements were less rigid than those of the coils. They varied considerably by product and region. Factories are concerned about the possible rise in prices for scrap and electricity. Therefore, they do not want to go to lower selling prices.

Attractive import offers are quoted for all metal products. However, interest in them is limited by long delivery times, the risk of tariffs and lack of capacity in local ports.

Uncertain prospects
In addition to the uncertainty in the direction of demand and prices, several other factors affect the market.

The traditional summer renovation period is approaching. Manufacturers are considering extending work breaks to control production in line with market demand. Some are idle blast furnaces or postpone their re-ignition.

On the positive side, lower prices could stimulate pent-up demand for steel and ease concerns about a lack of construction orders early next year.

The easing of China's Covid-related lockdowns, coupled with an economic stimulus package, should increase demand for raw materials, thereby supporting steel prices.

However, inflation in Europe poses a risk to domestic consumption. High food and energy prices will reduce private demand for metal-containing products such as household appliances and cars.