The Polish economy uses more steel than before the pandemic, and its demand is twice as high as current production, the Polish Economic Institute reports. The demand for steel is growing in construction and industry, where it is used, inter alia, for the production of household appliances and in the automotive industry.
- Steel demand grows as economies recover from the pandemic
- Increased demand, shortages and limited supplies have resulted in a dramatic increase in the prices of steel products around the world
- The demand for these products flows, among others from the construction and automotive industries and from manufacturers of household appliances
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As PIE pointed out, high prices and the dynamics of their growth are driven by the growing demand for steel in the largest economies, in particular in China, which is responsible for approx. global iron ore demand. On the Polish market, price increases are mainly caused by a shortage of supply. Some industries, such as household appliances, indicate the shortage of raw materials as one of the main obstacles to the development of production.
“The Polish economy, which is recovering after the pandemic, uses more steel than before the pandemic, and its demand is twice as high as the current production” – said analysts in the latest issue of “Tygodnik Gospodarczy PIE”. They added that the demand for steel is growing in construction and in industry where it is intensively used, among others for the production of household appliances or in the automotive industry.
Experts admitted that the shortages of steel in Europe and in Poland also have other sources. They recalled that EU steel production in 2016-2018 was “under particularly heavy import pressure”. In 2018, more than 34 million tonnes were imported, with European production falling at the same time. Market protection measures introduced by the EC from mid-2018 resulted in a decline in imports, which did not bring about the expected change, because the weakening steel consumption – especially in the automotive industry – and the uncertainty of demand forced steel mills to further reduce production. In turn, the short-term optimism at the beginning of 2020 “was extinguished” by the development of the pandemic and greater reductions in consumption, downtime, disruptions in supply chains. “During this period, the mills made further significant cuts in production capacity, some eventually, eg in Krakow” – indicated.
Record low stocks
At a time of rapidly rising demand for steel in China in mid-2020, the steel market in Europe also began to recover, analysts noted and recalled the current 17 different types of protection instruments for steel products, “which significantly reduce the possibility of filling deficiencies with imports.” . They added that the anti-dumping duties applicable to imports of individual product groups in many cases exceed the level of 25%, and they are charged regardless of the availability of quotas.
“The most severe anti-dumping duties are on hot-rolled sheets: from China to 35.9%, from Russia to EUR 96.5 / t, from Brazil to EUR 63 / t, from Ukraine to EUR 60.5 / t, from Turkey to EUR 7, 6 percent and customs duties on cold-rolled, galvanized or coated sheets “- they mentioned. This resulted, they explained, a sharp increase in prices and a reduction in inventories by distributors and end recipients to historically lowest levels, without the possibility of replenishing them.
As noted, the level of rebound in the steel market, after the crisis related to the pandemic, surprised the market and companies. “The dramatic rise in prices is a response to increased demand, shortages and limited supplies“- explained the analysts. This translates into a revival of the domestic market – high profits are also determined by the increases in the valuation of stock exchange producers.
“The continuation of trade restrictions reduces the competitiveness of European steel producers, however, it consolidates the shortages and will maintain the pressure on price increases, which has a negative impact on production companies at subsequent levels of processing” – concludes PIE.
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