June 2023 - Steel Director's Briefing
As the European steel industry continues to navigate its way through supply-side issues, we find ourselves yet again trying to understand what the impact of these ongoing constraints will be.
Much as we reported in our previous article, the price aspirations of European mills remain high, due largely to production problems at Tata and Arcelor. However, it's clear that buyer sentiment continues to attribute recent price increases in the UK to supply constraints, rather than a genuine uptick in demand.. This situation contrasts noticeably with prices from outside Europe, which are somewhat lower.
With a significant influx of steel that has started to arrive into the UK, continuing over the coming weeks and months, European mills are justifiably nervous about potential price repercussions. In fact, several mills have already broached the possibility of reducing capacity and decommissioning blast furnaces.
Supply issues at Tata Steel Netherland’s Ijmuiden plant persist. The UK arm of Tata is also anticipating production constraints, partially due to their continued support of their Dutch counterpart. This situation is likely to continue until September or October, and possibly beyond.
These production constraints are having an impact on Tata's downstream distribution businesses. Their recent order of 25,000 tonnes of Hot Rolled Coil (HRC) from India is a significant development. Depending on the timing of its arrival, this consignment could consume all of the UK's steel ‘Other Countries HRC quota’, potentially disrupting material availability and impacting UK prices, into Q1 of 2024.
This move by Tata UK raises an intriguing question: is this a strategic attempt to manipulate the market, or is it a necessary step to ensure the continuity of supply for its downstream businesses? Or perhaps a combination of the two?
Automotive demand, meanwhile, continues to linger below historical levels in the UK, a trend that appears set to persist in the coming months given rising interest rates and the increased cost of living. How much appetite is there for people to purchase new vehicles?
In the midst of this ongoing uncertainty, the outlook for Cooper and Jackson remains strong. Demand continues to be robust, and the outlook for June is promising. In addition, we are thrilled to announce the successful completion upgrades to our Narrow Blanking Line. Enhanced to a width of 750mm and equipped with new electronics, a new measuring system, and a state-of-the-art leveller, we can now deliver improved flatness and tighter tolerances for our customers.
As we navigate the months ahead, the industry finds itself in a familiar, cautionary state - a clear echo of the 'wait and see' sentiment we reported last month.
