This week the EUROFER report for 1Q 2024 was released

Buyers are not active on the HRC market, they said. Buyers have accumulated sufficient stocks, they said, explaining the pause in the market.

Indeed, there is a lull in the market globally until the end of the holidays in China. Everyone is waiting for the Chinese market to wake up, since the trend is not obvious.

But here is the first interesting thing. This week the EUROFER report for 1Q 2024 was released. First of all, their assessment of real consumption in 2023 is interesting, that decreased by 3.1%. In 2022 real consumption was at 147.7 million tons, according to the European Steel in Figures 2023 by EUROFER. It means that real consumption in 2023 was about 143 million tons. Of course, there could be revisions, but in general it’s something like this.

Apparent consumption in 2023 according to EUROFER was 129 million tons. It means a gap of 14 million tons in 2023 between real and apparent consumption. And if you look at the dynamics of two years from 2022 to 2023, the gap amounted to 24 million tons. It`s really huge.

Our models have slightly different data, but the conclusions are the same.

Buyers’ stocks are empty. With such a gap, anything else is impossible. This was compounded by buying pressure in September-October, which swung the pendulum towards HRC price of 600 euros. And empty stocks swung the pendulum quickly towards 760 euros. When we hear about sufficient stocks of buyers this is not the case.

The second point. Economic sentiments in the EU has improved sharply since November and is now well above average. The economy is not falling, inflation is returning to the target range. The market is waiting for a reversal of ECB policy in the first half of the year. It will have a positive impact on the steel market and the growth of apparent consumption. By the way, ArcelorMittal also points out this in its 4Q report.

In 2022-2023, apparent consumption fell due to domestic steel production. And now for supply growth steelmakers need sufficient margins, in other words strong prices.

In addition, good economic sentiments suggest that real consumption, which was depressed in 2H 2023, will improve in Q1-2. It looks like we’ve passed bottom if black swans can be avoided.

Abilities of putting pressure on steelmakers has been exhausted and the potential for upward movement is much higher than the possible downward. Everyone is waiting for China to understand what the price of imports will be in May. But even a neutral scenario will be favorable for the European market.