European steel buyers start to stockpile as coronavirus causes logistics issues

London — European steel production continues as usual as German buyers start to stockpile and logistics problems emerge as a result of the spread of the coronavirus pandemic across Europe, sources said Thursday.

As the pandemic intensifies in Europe and countries step up measures, distributors and end-users of flat steel have started to stock up on material as they fear supply disruptions lie ahead.

"They are thinking that if there isn't any production, they would rather have something left in the warehouse to work with," a German steel service center source said.

The source said that production and shipments of steel from Southern and Central Eastern Europe had so far been unaffected, but that questions had arisen over future end-user markets and the impact on the economy if the virus gains a greater hold in Germany.

"What use is it to be the best mechanical engineering company when workers are at home?" the service center source said.

Steel mills remain open

A German mill source said his company had had a spike in short-term bookings as buyers increasingly wanted their material at short notice, but that logistics would become more and more of a problem from Italy to Germany following Austria's imposition of restrictions on the border with Italy.

The Germany-based mill source said production in Italy had decreased marginally, but that there would need to be much less production to solve jams on rail and road.

The majority of the Italian based sources confirmed that they were still working, apart from some long producers that have announced some temporary stoppages between Wednesday and Thursday and that are located in Lombardy one of the areas hardest hit by the virus, but that are still sending their orders. Nevertheless, there are expectations that an overall slowdown in production is inevitable.

Late Wednesday, the Italian government took the decision to close all non-essential businesses. Factories that remain open have to follow new safety measures.

"As underscored by the decree in Italy, factories can stay open but I am sure some will follow the example and temporarily stop production for a few weeks. We all expect a slowdown but this ultimately is not too bad as there will be a knock-on effect on demand so it will be good if supply and demand balance," a source from a leading Italian mill said.

Questions over further measures

"In Europe, Northern Italy and Germany together with Austria are the main trade partners so it would be better coordinate factory productions among these regions as they are all linked if you think about components, scrap and so on," the source added.

Sources expect there will be more border restrictions across Europe in the next few weeks, but not well coordinated with the steel industry.

The state of North-Rhine Westphalia, the industrial heartland of Germany, has not issued any state-wide decrees despite being one of the most affected European countries.

Prices of flat steel have been stable in the past few days in Germany with sources expecting increased lead times beyond the current delivery times of May-June for coils, particularly if buyers continue to stock up or switch from their Italian suppliers to other European sources.