Price optimism in the first quarter of 2023 did not find its confirmation in the future

After the second half of 2022, which was a period of low steel prices, steelmakers hoped for a better situation this year. Partially, their optimism was justified, but not for long.

Price decline

Starting around the end of March, there has been a significant decline in prices for steel and raw materials on world markets. For various positions, rolled steel prices fell by $50-70/t. Global prices for HRC are declining due to weak demand. Sales decreased due to negative market sentiment under the influence of uncertainty in the Chinese market and negative macroeconomic factors.

European producers react accordingly to the negative price environment. In January-March 2023, German steelmakers reduced steel production by 6.65% y/y – to 9.16 million tons, while their French counterparts produced 2.33 million tons of steel, which is 32% less compared to the same period last year. Italy in the first quarter reduced steel production by 6% compared to the same period in 2022 – to 5.63 million tons.

European companies have to compete with cheap imports in their own markets. According to GMK Center, the gap between European hot-rolled steel prices and Asian import offers is becoming dangerously large and volatile. This situation in the short term may lead to lower prices for European products. If demand does not recover in May, which is unlikely given the economic instability, Italian hot-rolled steel prices could fall to €750-770/t.