Since the last quarter of 2020, there has been a sharp rise in steel prices, which has become even more pronounced in recent months. According to experts, the increase is around 25% and is the highest on record since 2008. While the current health crisis is mainly to blame, it is not the only reason.
Indeed, many steel traders are blaming the increase on the COVID-19 outbreak. Due to the abrupt end of industrial activities in Europe in mid-March and a collapse in demand, steelmakers have decided to shut down the blast furnaces. About ten were suspended, which were responsible for around 50% of European production. But things took a turn for the worse in September 2020, with the reopening of construction sites and the gradual resumption of economic activity. This sudden increase in demand was not anticipated by steelmakers who did not restart enough furnaces to meet the increase in demand. Demand has therefore greatly outstripped supply and created significant delays in deliveries.
Companies in the sector are urging their purchasing departments to be cautious in the current context, as this internal memo from one of the European leaders shows: “At the moment there is no indication whatsoever of a price drop. On the contrary, all available information in the market suggests further price increases. We firmly suggest avoiding price speculation and advise buying only those tonnages that you need. In the entire group we also maintain this strategy when we need to buy wire rod…”
The situation is even more difficult in Europe because the pandemic is not the only factor responsible for this shortage in the European market. In fact, since February 2019, the European Union (EU) has implemented safeguard measures to limit massive imports of steel products in order to protect its market. The internal memo we referred to in the previous paragraph emphasizes this, stating, “as we speak, the EU is lobbying to continue the safeguard measures and the European Commission will probably open an investigation into this matter. We are convinced that the continuation of these measures will complicate importing wire rod from third countries even more than in the past, which will also result in higher European wire rod and rebar prices.”
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