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January 2014 | Galvanized Steel and Tinplate Market Tracker

Quiet start to 2014 as prices hold once more: European Market Highlights

  • 2014 begins with little activity...
  • ...although producers likely to achieve price increases soon
  • ArcelorMittal to restart Avilés plant, focus on automotive
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Market Outlook

With the Christmas and New Year breaks to contend with since our last issue, it is little surprise that we begin 2014 reporting of little activity in the market over the last few weeks. Prices on the whole remain more-or-less the same as they did a month ago, and indeed since mid-October in both the EU and Turkey. Nevertheless, although producers will be happy to have seen the back of constant price deflation as occurred through much of 2013, they are still likely to search for increases soon, particularly given continued squeezed margins. Price increases in the USA continue to reduce competition in EU markets and the heavy weakening of the Turkish Lira since early December should help producers there. ArcelorMittal’s decision to restart its Avilés plant in northern Spain come early April is a further indication of the growing confidence in the European market.
The early weeks of the year are traditionally quiet for Europe’s steel markets. With many market participants taking extended breaks over the Christmas and New Year period, little activity takes place and the market does not usually begin to develop and change direction until late January. Hence it is of little surprise that we report almost complete pricing stability since our last report in mid-December.

Prices of hot-dipped galvanized (HDG) material thus remain at around €540/tonne in northern European markets and at about €500/tonne in the more southern markets. This stability also extends to the Turkish market. HDG prices here are at $785/tonne for 0.5mm material and pre-painted steel (PPGI) of the same thickness is being sold at $965/tonne. Hence prices for coated steels in both the EU region and Turkey have now been more-or-less unchanged since mid-October.

Producers continue to hunt for price increases
Although an improvement on the general pricing decline seen through much of 2013, Europe’s producers of coated steel products are not content to simply accept this recent pricing stability, particularly given the low margins that continue to be prevalent in the industry. As reported last month, producers continue to try to push for marginal increases of some €30/tonne. Although they have had no success as of yet, we maintain our viewpoint that prices will head up on average this year and recent indications only serve to bolster our case for an increase in the near term.

2013 vehicle production (% change year-on-year, estimated)

Spanish vehicle exports by country, 2012

Reduced competition, weakening currencies will help
Prices continue to increase in the USA, which are up by another $5-10/tonne this month (see American Market Highlights), and this is leading to lower levels of competition within European markets as sellers increasingly turn their focus to the USA. During the first 11 months of 2013, US imports of galvanized steel rose by 12% year-on-year and this has been driven not just by rising prices in the USA but, in the case of Turkey at least, currency movements as well. Having suffered rising import levels for much of 2013, the ~10% weakening in the Turkish Lira since early December, against both the dollar and the euro, is thought to be providing some relief to Turkish market participants. This should therefore assist Turkish HDG and PPGI prices in increasing soon, particularly given an expected pickup in demand levels once spring arrives and construction activity picks up.

ArcelorMittal confident in Spanish automotive revival, Avilés plant to restart in April
Of most note this month, however, and an indication that the market appears to be improving, has been the announcement by ArcelorMittal that it is to restart one of its galvanizing lines in Avilés in northern Spain beginning early April. Between now and then, the line will be modified so that it will be able to produce the higher-quality galvanized steels destined for the automotive sector.

The line has been closed since November 2011 and was previously heavily dependent on the construction sector, in particular on demand from public infrastructure works. While this area of the Spanish economy is still to show much demand growth, the automotive sector was a particularly bright area for the country in 2013 and is expected to continue being so over the next few years.

A number of automotive companies have announced plans to build or expand existing facilities in the country and, along with the UK, Spain is thought to have been the only other Western European country to see significant growth in automotive production last year (see chart). During the first 11 months of 2013, Spanish automotive production grew at about 9% year-on-year. The country’s factories have benefited from reduced costs relative to other European countries and this has seen large automotive manufacturers shift production to Spain.

The announcement of this reopening is likely to be jarring to former workers of ThyssenKrupp’s Galmed works (in Valencia, eastern Spain), which was mothballed back in August of last year. That site was already focused on the automotive sector although the ArcelorMittal works in Avilés does have some clear advantages. Most clearly is the fact that the site is a fully-integrated works, whereas the Galmed works was dependent on the ArcelorMittal Sagunto works next door for its substrate. Secondly, the Avilés plant is better located given that nearly all of the automotive plants in Spain are towards the north, with only Ford operating a plant near to Valencia in the east. With the Spanish automotive sector largely dependent on exports for its growth (as with production, exports rose by about 9% during the first 11 months of 2013) and with the bulk of these exports heading north to France, Germany and the UK (these three countries combined account for 55-60% of Spain’s automotive exports), ArcelorMittal’s northern steel works in Avilés is undoubtedly well-placed to take advantage of the growing demand from Spain’s automotive sector.

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