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The current situation related to the conflict in Ukraine poses a significant threat to the European steel market. Our experts estimate a production deficit of 1 million tons of steel in the second quarter of 2022.
The uncertainty of the future market situation creates serious threats to the existing supply chains that have been formed over the past 20 years and now it is quite obvious that even in the event of an early end to the conflict in Ukraine, the market will not be the same.
Based on the experience of implementing our projects, we can state the fact that previously customers were very reluctant to agree to the use of materials produced in China, separately highlighting the relevant provisions in the requests for price proposals and contract documents. Now the question remains as to how this situation will continue in the future. In the case of a reorientation of supply chains to material from the PRC, the situation may cease to be as critical as it seems now, but it is absolutely clear that product prices will be significantly higher than the prices of February 2022, while maintaining all the risks associated with the PRC policy and increased logistics costs.
Most of the largest European suppliers of products take a wait-and-see attitude and inform customers that they are not able to provide price offers. Those suppliers who still give price offers report that the validity period of such offers is only a few hours-until the end of the day on which this offer was sent, which requires quick decisions, the adoption of which is not always possible in conditions of uncertainty.
Based on the offers received from those suppliers who continued deliveries, it can be seen that prices have already doubled. At the beginning of 2022, the metal price level averaged 1,100 euros per ton, but by Monday, February 28, the price was 1,700 euros per ton. Today, suppliers offer their products at a price of more than 2,300 euros per ton for metal sheets and 2,000 euros for metal profiles, which is more than a twofold increase relative to the pre-crisis level.
We expect that the price growth trend will continue in the future and the only question is how rapid these changes will be. The development of the situation with Russian products located at the EU customs border will certainly have a certain impact on the balance of supply and demand. Rail cars with products were sent from Russia and crossed the Russian border, but due to the development of the conflict, they cannot enter the EU. If the crisis develops further and the wagons cannot get into the European Union, the shortage of raw materials will lead to an even greater increase in prices. On the other hand, the seasonality of demand and the approach of the summer period will also certainly have an impact on the development of the situation.
In order to always have the entire range of products necessary for production, it is very important to diversify your supplies and have several reliable suppliers with a worldwide reputation in stock. Please contact us and we will send you a list of suppliers with contact details.
