The steel market is facing a prolonged recovery
We observe that steel purchases remained weak and the market literally faded in Europe, where companies are reluctant to place new purchase orders because of the threat of an extended economic slowdown.
This behaviour was strongly influenced by the automotive sector, the weight of the pandemic weighs a lot and it is showing a weak market recovery.
However, many countries are easing lockdown measures, allowing producers to resume operations, and now this is when we can see a little light on the horizon.
In a moment where European mills (and worldwide) are dropping prices, we have the numbers of the output statistics. World crude steel production is estimated to have fallen by 13% in April, according to a recent release by the World Steel Association. Nevertheless, demand for steel remains depressed and may continue in the same way for the next few months.
Let’s have a look to the very recently published Eurozone Manufacturing PMI, it is clear where we are now:
We are at the bottom of the long-awaited recovery. All the hopes and today’s wishes are that the recovery will be V-shaped, although there are no certainties that it will be exactly like that.
What’s going to happen next?
Let’s have to look at China to see how the steel market behaves. They are weeks ahead of us with the pandemic and it helps us understand what to expect.
At first sight, we can see that they are already overcoming the recovery. However, the publication of these results should be handled with care, as other indicators (such as exports and new orders) show that they face low demand in general. In fact this official Chinese Manufacturing PMI falls very slightly (from 50.8 to 50.6) although it is not seen in the graph.
Those graphs are helping to expect a gradual recovery in crude steel production and prices, probably we should wait the second half of 2020.
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