Europe's Steel Production to Outpace Demand

The EU steelmakers are being warned to remain cautious while restarting production capacities after easing of Covid-19 restrictions. The steel demand is likely to remain muted at least in the near term. Under such circumstances, steel production, even though at reduced capacities, may outpace demand, thereby leading to further price crunch.

As per estimates, nearly 18.9 million mt of steelmaking capacity was taken offline across the European region during the past two months. Only a few of the production facilities have come back online. In Italy, where steel production officially restarted in late April, mills are operating only at 40-50% capacity. The U.K and France too have announced restarts in line with restarts by automotive plants and construction projects. Meantime, Poland’s steelmaking capacities are not expected to return to normal operations any time soon.

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The new orders from automotive sector-one of the biggest steel consuming sectors, will take time for translating to new orders. Incidentally, global car sales are projected to drop by nearly 20% in 2020. The fall in western Europe is forecast to hit higher levels of 30%. It must be noted that the European automotive sector had reported almost complete halt during the second half of April.

The construction sector activities too are expected to make slow return to normal operations, warned analysts.