Goldman Sachs Group Inc. cut its forecast for European steel’s price this year by 14 percent because users of the metal are taking longer than the bank had expected to run down inventories. So-called destocking may only be completed by the end of the next quarter, two to three months later than estimated, Peter Mallin-Jones, an analyst at Goldman Sachs in London, wrote today in a note. He now expects European hot-rolled coil carbon steel to average 413 euros ($536) a metric ton this year. The bank also cut ratings on SSAB Svenskt Staal AB and Voestalpine AG.
Automakers and building companies are using up stockpiles of steel, rather than placing new orders for metal, as the world economic slump causes their sales to dry up. Goldman Sachs predicted a 12 percent drop in this year’s production of European hot-rolled coil, a benchmark steel product used in cars and construction, after weaker-than-expected economic figures. “Our U.S. economists have recently lowered their gross domestic product forecasts, with potential implications for European growth,” Mallin-Jones wrote. “Underlying demand appears to have been somewhat weaker than we had forecast.” The price of European hot-rolled coil has slid 57 percent to 350 euros a ton since peaking at 815 euros on June 18, data supplied by Metal Bulletin shows.
Goldman cut its recommendations on Stockholm-based SSAB and Voestalpine, located in Linz, Austria, to “neutral” from “buy.” London-based analysts Mikko Heiskanen and Andrew Byrne also contributed to the report.