Aluminum, Steel Demand Weakens in Northern Europe

The normally pragmatic Netherlands has been strangely agitated recently, as both the construction and agricultural industry have protested on the streets of the capital, the Hague, against the government’s measures for combating nitrogen and PFAS-based pollution.
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In itself this would barely be newsworthy for MetalMiner if it weren’t for the impact it is having on an already subdued metals industry.
Even before the widespread disruption to the Dutch construction industry, demand for steel and aluminum was suffering from depressed German industrial consumption, largely due to a downturn in the automotive market.
But in the Netherlands, the government is struggling to resolve an issue with nitrogen emissions permitting, which Reuters reports are four times the E.U. average per capita in the small and densely populated Netherlands.
Although 61% of emissions are coming from agriculture, a sizable portion also comes from the construction industry – a big consumer of aluminum and steel products.
The impact is particularly damaging, as the country has been enjoying a boom in infrastructure and housing investment of late.
As a result of a fiasco over how permits are assessed, a review is underway and, in the meantime, new permits have been withheld, leading to delays and project uncertainty.
Aluminum extruders estimate the European market is down at least 20% from last year as a result. With steel prices also waning, participants across the supply chain are reducing inventories, adding further to the fall in demand being experienced by producers.
Lead times have come in and order books are weak, as many in the steel and aluminum supply chains find themselves overstocked relative to ongoing demand. The double whammy of weak automotive demand now being exacerbated by a fall in construction activity has caught many by surprise.
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The government in the Netherlands will no doubt resolve its permitting issues. However, a return to last year’s robust level of activity is unlikely to bounce back quickly and producers remain pessimistic about demand next year.
In the meantime, prices are likely to remain under pressure and lead times will remain short into 2020.