This week the EUROFER report for 1Q 2024 was released
Buyers are not active in the HRC market, they said. Buyers had accumulated enough stocks, they said, explaining the pause in the market.
In fact, there is a lull in the global market until the end of the holidays in China. Everyone is waiting for the Chinese market to wake up, as the trend is not obvious.
But here's the first interesting thing. This week the EUROFER report for 1Q 2024 was released. Firstly, its assessment of real consumption in 2023 is interesting, which decreased by 3.1%. In 2022, real consumption was 147.7 million tons, according to EUROFER's European Steel in Figures 2023. It means that real consumption in 2023 was around 143 million tons. Of course there could be revisions, but in general it is 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 consumption and apparent consumption. And if you look at the two-year dynamics from 2022 to 2023, the difference was 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 the HRC price of 600 euros. And empty shares quickly swung the pendulum to 760 euros. When we hear about sufficient stocks from buyers, this is not the case.
The second point. Economic sentiment in the EU has improved markedly since November and is now well above average. The economy is not falling, inflation is returning to the target range. The market awaits a reversal of ECB policy in the first half of the year. It will have a positive impact on the steel market and apparent consumption growth. In fact, ArcelorMittal also highlights this in its 4Q report.
In 2022-2023, apparent consumption fell due to national steel production. And now, for supply growth, steelmakers need sufficient margins, in other words, strong prices.
Furthermore, good economic sentiment suggests that real consumption, which was depressed in the second half of 2023, will improve in the first quarter of 2023. It appears that we have passed the bottom if black swans can be avoided.
The ability to exert pressure on steel mills has been exhausted and the potential for upward movement is much greater than the possible downward movement. Everyone expects China to know what the price of imports will be in May. But even a neutral scenario will be favorable for the European market.
