The hits to the global manufacturing economy just keep coming, this time the news comes from forecasts of falling prices for steel in Europe.
“We expect flat steel prices to continue to decline,” states a recent report from Swiss-based bank UBS. Flat steel refers to rolled metal rather than rods or billet.
The UBS report cites demand weakness from the auto sector and energy intensive industries, as well as rising imports and climbing stockpiles of the metal.
Steel prices are particularly sensitive to shifts in demand from manufacturing companies, which in turn have been adversely impacted by the stunning rise in costs of energy including electricity and natural gas.
Europe’s economy was already weak coming out of the pandemic but the energy shortage and price spike seem to be dealing it another blow, especially in the industrial sector.
The region’s single currency area, the eurozone, has seen a steady cooling off of its manufacturing sector since June. The PMI index peaked above 63 that month before declining to 58.5 this month. A reading of above 50 usually indicates the industrial sector is expanding. However, the fall in the index could augur a trend into contraction.
That slowdown or cooling in the factor sector is disappointing because in the second quarter the eurozone economy grew at 2.2% following two quarters of decline. Further manufacturing weakness could drag the area back into recession if things don’t change for the better.
