European Steel Distribution deeply impacted by Covid-19
by David Fleschen
Beginning of March, demand decreased everywhere in Europe.
Linked to the local shut down intensity, EUROMETAL members recorded 20 % to 60 % drop.
The most impacted sectors are construction, machines building, manufacturing,…
Distributors are using furlough schemes when available, depending on local options.
Starting May, customers expect to recover step by step.
Orderbooks are not comfortable but not so poor. More recent sales forecast are closed to 55% - 65 % compared to budgeted sales plans (more optimistic in NW and NE Europe versus Southern Europe).
First semester results of Distributors will be heavily impacted!
Steel Services Centres
Everywhere in Europe, lack of Automotive activity with big decreases and line stoppages, impacted the orderbooks of most SSC.
Automotive (EOM + subcontractors) needs make roughly speaking 50% market shares of the processed products (slit coils, blanks, sheets), in Europe. So, depending on how deep the influence of automotive is in the customer portfolio of each SSC, during the last six weeks, SSC are working between 20%/25% and 80%/85% of capacity.
For next weeks, SSC are waiting for EOM operation to be resumed. Automotive recovery will be on one, two or three shifts basis? How big could be SSC expectations?
The industry customers’ needs will recover step by step linked to the Covid-19 shutdown evolution due.
During the coming months, construction customers will get a positive seasonality time.
Hope second quarter will be better than the first. Nevertheless the first semester 2020 will remain bad.
Stockholding distributors and SSC are facing lack of visibility and heavy challenges.
Numerous topics are real issues:
- Health and Safety of the Teams
- Customers demand
- Pricing trends (sales , purchasing)
- Stocks management and logistic
- Lead time from suppliers (EU and non-EU)
- Payment behaviour of customers (overdues, bankruptcy,…. Warning for small and midsize customers)
- From fixed to variable costs
- New business model definition (digitalization,….)
2020 year will remain one of the worse that Distributors, Steel Service Centres and Traders face during the last 60/70 years.