European Steel Prices to Remain Subdued in the Short Term - Fitch Ratings

Release time：Nov 06, 2019 From：admin

Fitch Ratings and CRU said that prices for steel products in Western Europe have fallen in 2019 from their 2017-2018 peak and are likely to remain subdued into 2020. They said “Steel producers' margins have been pressured, but this could ease towards 2H20 due to capacity cuts and a decline in input costs. The steel sector's volatility is factored into our ratings of European steel producers that usually manage to mitigate such external pressures with spending cuts. Spot steel prices and margins have declined gradually in 2019 due to a combination of weak demand, available supply (the effect of production cuts has yet to have a significant impact on prices) and cost pressures. Registrations in the auto sector, one of the main steel consumers, declined by 1.6% yoy in January-September. At the same time, the steel market remains well supplied, partly due to high import availability. Safeguard measures, including quotas and tariffs, introduced by the EU in February reduced steel imports only slightly. The full extent of announced domestic production cuts has yet to be seen, with most cuts scheduled for 4Q19. Steelmakers' margins were further squeezed by persistently high raw material prices, which started to decline only recently.”

They said “We anticipate that prices will remain subdued next near due to low demand as the European steel market may continue to face challenges. Fitch expects further modest pressure in the European automotive sector, which will affect steel consumption. Despite potential growth in the auto sector in some countries, the French and German auto markets have been at a cyclical high recently, and macroeconomic weakness in these countries is likely to affect automotive demand. Brexit is likely to have a negative impact on UK auto sales. Furthermore, major uncertainty remains about how the new EU emission targets will affect carmakers' product offering and customer response to electrified models. We expect slow growth in the construction and mechanical engineering sectors, which will vary geographically. However, potential ECB-driven fiscal stimulus could lift European demand for steel products.”