Steelmakers in Western Europe are trying to push through increases for their hot rolled coil, though sources noted that it was hard to determine where steel prices were at present. Reports indicate that mills are now seeking about €600 ($650) EXW per metric ton, reflecting an increase from deals that were as low as €520-530 in late September. However, those prices also reflect a 25% decrease from the €800 ($865) mills sought in January.
One trader acknowledged mills wanting to seek increases, telling MetalMiner, “I understand that the mills are raising prices as they are operating at a loss. But on the other hand, there is no demand.” The source also compared the current situation in Europe to the 2008 financial crisis, but noted that the problem in this instance is from the industrial side (buy side), not the banking side (buy side).
“Nobody’s willing to take a chance,” the source said, pointing to the difficult economic situation in Europe, specifically regarding interest rates.
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Interest Rates Remain a Problem Across the EU
High interest rates within the Eurozone, the area of Europe where the Euro is the official currency, have also stifled demand. However, in mid-October, the European Central Bank (ECB) announced a cut of 25-base points across its key rates. “Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 3.25%, 3.40% and 3.65% respectively, with effect from 23 October 2024,” the ECB said in an October 17 statement.
The source stated that they believe rates will still need to go lower in order to stimulate economic activity. Meanwhile, housing starts in Germany, Europe’s largest economy, totaled 15,000 units in August. According to data from Trading Economics, this reflects a decrease of almost 8% from the16,300 units seen in August 2023, The latest figures also show a decrease of almost 60% from the 35,900 units recorded in December 2021.
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Data From Germany Spells Trouble For More Than Steel Prices
Hot rolled coil has multiple applications in the construction sector. The product also serves as feedstock for the production of welded tubes of cold rolled coil (CRC), which can then undergo hot dipped galvanizing for use in autobody construction. CRC normally carries an average premium of €100 ($110) per metric ton over HRC.
According to an October 22 statement from the European Automobile Manufacturers’ Association (ACEA), September new vehicle registrations in Europe were down 6.1% year on year to 809,163 units compared with 861,973 units in September of 2023.
The German market itself also saw a 7% drop, whilst France and Italy saw respective drops of 11.1% and 10.7%. The ACEA went on to note that battery electric vehicles (BEVs) also saw drops in September.
“While battery-electric cars accounted for 17.3% of the EU car market in September, up from 14.8% last year, the year-to-date volumes dropped by 5.8% with the total market share falling to 13.1% from 14% last year. Plug-in hybrid car registrations for September also declined by a sizable 22.3%,” the agency noted.
Chinese Imports Threaten EU Car Makers
On October 28, German automaking group Volkswagen also announced its plans to shut down at least three of its plants in Germany and downsize plants in other locations, which could result in over 10,000 job losses.
As noted by Politico, “The car giant, along with the rest of Germany’s once-vaunted auto industry, was slow to invest in electric vehicles and has struggled to catch up with the likes of U.S. rival Tesla and China’s BYD.”
Nevertheless, the traders told MetalMiner that Volkswagon’s decision is unlikely to further impact prices, adding, “I think that it’s a reflection of the situation.” They specified that BYD has “attacked the European market” with its automobiles. Meanwhile, another industry watcher described those vehicles as “two times cheaper and two times better.”
UK television commercials advertise BYD’s Dolphin model from £33,000 ($43,000), while the starting price on Volkswagen’s closest equivalent, the ID.7, is around £50,670 ($66,000). However, the European Union is due to continue its plans to introduce countervailing measures of up to 35.3% on electric vehicles from China. This would be in addition to the EU’s 10% tariff on imported cars.
Following an anti-subsidy investigation from 2023, the tariffs would take effect in November and last for five years. That said, the EU and China have agreed to talks on alternatives to tariffs, such as minimum price commitments.
