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December 2013 | Galvanized Steel and Tinplate Market Tracker


2013 ending in similar fashion to 2012: European Market Highlights

  • 2013 ends with producers awaiting New Year for price increases
  • Tata Steel, voestalpine facilities see production increases in 2013
  • 2014 set to bring more sustainable price increases
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Market Outlook

This year has not been a great one on the whole for Europe’s galvanized steel producers. But talking about the region as a whole hides some sharp disparities between individual countries. Most notably is the dividing line between the north and south of Europe. In the south, both Italy and Spain have seen output fall and producers struggle, with ThyssenKrupp closing its Galmed facility in Spain back in early August. Meanwhile in some northern European countries, such as Austria, the Netherlands and the UK, production is estimated to have increased considerably, buoyed by stronger markets and upgrades on behalf of Tata Steel and voestalpine. Nevertheless, pricing performance has been weak throughout 2013 in both northern and southern European markets but we think this likely to change in 2014. Capacity utilization is creeping up and, combined with rising sentiment, producers should have more success in increasing prices during 2014 than they have had during 2013.
A recent price increase that failed to stick and producers awaiting the beginning of the New Year to try to increase prices again – 2013 is set to end much the same way as 2012 did for Europe’s galvanized steel producers. The early weeks of December have seen little change to the pricing dynamics that played out last month and prices remain at near four-year lows. With most large buyers unwilling to build up stocks to any significant degree toward the end of the year, buying has been minimal, although there are some tentative signs that producers will be successful in attaining price increases during early 2014.

Most of Europe’s major galvanized steel producers have announced that they will seek base price increases of some €30-40/tonne on galvanized products beginning January. The low levels of business this month have seen some marginal increases, mainly in northern European markets, although most buyers are thought to be resisting the price increases at present.

Prices generally stable on last month, some rebound in northern markets
Spot prices of hot-dipped galvanized (HDG) in northern European markets have strengthened to around €540/tonne on average, a rebound of €10/tonne on early November as competition from imports has dried up. Producers attempting to sell into southern European markets, however, continue to come up against weaker fundamentals and prices here remain at around €500/tonne. This pricing stability is also evident in Turkey, where prices remain unchanged since late October. Thinner-gauge (0.5mm) HDG prices remain at around $795/tonne while 0.5mm pre-painted steel (PPGI) is still selling for about $965/tonne although the immediate outlook for Turkey is relatively stronger, with increased substrate prices and an expected increase in demand from the construction sector during the spring likely to lead to rising prices soon.

European galvanized steel market (million tonnes)

European galvanized steel capacity utilization vs. European HDG prices

Wide differential in performance between EU countries
This year has seen some notable differences from 2012, however. It has certainly been one marked by contrasting dynamics between northern and southern European markets. The two key southern European markets, Italy and Spain, have seen production fall, by 9% and 4% respectively during the first nine months of the year. Meanwhile, producers in northern Europe have actually seen production expand, considerably in some cases. Output in both Austria and the Netherlands is set to rise by some 25% this year and that in the UK by around 12%. Both Tata Steel (based in the Netherlands and the UK) and voestalpine (Austria) have upgraded their facilities over the last 12-18 months, expanding both their output capacities and capabilities. As a result, the two companies are understood to have improved their competitiveness in supplying auto-grade HDG, with voestalpine notably securing large contracts in both China and the USA as the company has looked to reduce its exposure to the declining European automotive market. Tata Steel has also been able to benefit from its presence in the UK market, which is set to be one of only two European markets to see rising automotive output this year.

2014 outlook
In our view, the net result of these dynamics is that EU galvanized steel production is set to increase by some 2% this year to around 27 million tonnes (see chart). With ThyssenKrupp beginning its capacity cutbacks this year as well, we understand that capacity utilization levels have begun to inch up, particularly in recent months. With further capacity cutbacks to come in 2014, from both ArcelorMittal and ThyssenKrupp, utilization levels should rise even further next year.

As such, we believe that producers will be successful in pushing through price increases over the next year given the link between utilization levels and prices (see chart). They will be helped by the fact that European prices have become increasingly competitive over the past couple of years, failing to match increases elsewhere, particularly in the USA. This has been made evident by the EU’s net export position of galvanized steels, which, at some 700-800,000 tonnes in both 2012 and 2013, is at its highest level since 2003.

Improving demand should also help to support price rises through 2014. We have noted before how Europe’s purchasing managers’ index (PMI) has moved into expansionary territory since July and this typically coincides with rising consumption of galvanized steel products. The last time that Europe’s PMI moved up into expansionary territory as it has done over the last few months was back in late 2009. There followed significant price increases thereafter through 2010 and 2011, which rose by an average of 25%. Europe’s galvanized steel producers will be hoping that 2014 will bring the beginnings of something similar again.

Click here to view MBR's European statistics for the galvanised coated steel sectors