However, the worry for ferro-alloys suppliers is the looming prospect of another Europe-wide economic recession, as recent economic and manufacturing data has suggested, and its potential impact on consumption.
Moreover, financial analysts and economists have also said that if the current liquidity crisis in Europe persists, there may be another credit crunch that will extend any economic recession, or worse.Indeed, overall ferro-alloys market sentiment has turned bearish this month, with prices slipping after persistent increases this year through April, according to Metal-Pages data.
Industrial production and steel demand in the developed world have not recovered to levels seen before the financial crisis and so a state of alloys surplus exists despite tighter market discipline and cuts in European production in recent months.In the euro zone Germany, the economic locomotive of the EU, produced 3.6 million tonnes of liquid steel last month – a drop of 5.5% on April 2011, according to data from the World Steel Association (WSA). Italian and French steel production dropped 3.2% and 1.8% respectively in the same comparison, while Spanish production slumped more than 14% to 1.3 million tonnes, it said.
Overall, apparent steel use in the EU is forecast to slide by 1.2% to below 151 million tonnes this year, although a modest recovery of 3.3% is expected in 2013, the WSA said.
That weakness reflects a spread of capacity closures among European steel makers in recent months, not least in Eastern Europe where some steel smelters have been operating at only half of their rated production capacity for several months.
Moreover, there were drops in steel production in recent months in Austria, Belgium, Spain, Sweden and the UK, while the trend has spread to neighbouring producers outside the EU, such as Russia and Ukraine, and as with China there seems to be little prospect of a recovery soon.
And if demand for metals in China slows substantially, the effect on world metals markets is likely be disproportionately bigger, given the prominent role that China plays as the biggest consumer of commodities in the world.