European steel trapped in quicksand
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EUROPEAN STEEL TRAPPED IN QUICKSAND
The expected rebound in European steel demand seems to be running out of steam, as the seasonally weaker summer months approach and Chinese exports stay at multi-year highs, analysts said on Wednesday.
Shares in steel producers, which have already fallen by 24% from their Q1 highs, tend to peak between February and May and then drop by 11-12% between mid-May and early October, Deutsche Bank pointed out in a note.
"A softening cycle could still weigh on sentiment before recovery signals potential support for sentiment later in Q3", it added.
BofA also shares this cautious stance on the sector, as it does not see any relevant sign of demand recovery in Europe yet.
European crude steel production currently remains at low levels following a very weak 2023. High exports from China are also likely to continue to drag on global prices, the bank said.
According to BofA forecasts, the demand outlook for key segments of European steel demand are all negative for 2024, including autos and industrial production.
DB believes this adverse seasonality favours defensive business models like Austria's Voestalpine VOES.VI, France-based Aperam APAM.AS and Spain's Acerinox ACX.MC in stainless over Luxembourg-based ArcelorMittal MT.LU and German's Salzgitter SZGG.DE.
(Matteo Allievi)
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