Андрей Тарасенко © gmk.center Андрей Тарасенко © gmk.center

This bubble is huge

That evidenced by ZEW Business expectations data in November, that raised to 13.8 points. It indicates a significant improvement in market sentiments.

At the same time, the assessment of the economic situation continues to deteriorate, which is a reflection of negative expectations with a lag of several months.

Indeed, 4Q will most likely show a decline in GDP of Euroarea, despite the consensus forecast of zero m/m dynamics. This also means a reduction in activity in the steel consumption industries, as we expected, but it will be mild, which does not have a noticeable impact on the market.

A good level of expectations coupled with a weak current situation is characteristic of the recovery stage. This is further evidence that the bottom has been reached for the steel market. The price increases we are seeing are just the beginning, despite media headlines about “weak real demand.” Real demand is relatively stable. And the market has painted itself into a corner by creating a bubble of low inventories, significantly underconsuming and underproducing steel.

This bubble is huge.

p.s. we used ifo business cycle clock visualisation, but with other data source