Last year, the European Commission reached an agreement on a recovery and resilience plan worth approximately 60 billion euros with Poland’s previous government, led by the nationalist Law and Justice (PiS) party. However, access to these funds, part of the EU budget for 2021-2027, was initially blocked due to concerns about changes made to Poland’s legal system. Following the election of a new government led by pro-European Prime Minister Donald Tusk in December, the first installment of around €5 billion of previously blocked EU funding was received. Additionally, an additional €6.9 billion has been applied for, with potential reforms paving the way for access to more funds. This injection of funds could significantly benefit the region’s steel mills. Poland’s recovery and resilience plan aims to use its multibillion-dollar funding to enhance residential housing for improved energy efficiency. Moreover, the Offshore Wind Fund seeks to catalyze private investment in large-scale renewable energy projects. While these developments may take time to materialize, they offer hope for a market revival. However, economic pressure persists. Steel market participants in Poland and neighboring Czech Republic have reported weak demand, particularly from key sectors like construction and automotive, largely due to reduced exports to Germany. In 2023, the German economy contracted by 0.3%, with indicators like the Hamburg Commercial Bank (HCOB) German construction sector PMI and manufacturing PMI reflecting ongoing challenges, despite some improvement in recent months. Although the steel sector in Poland and the Czech Republic remains fragile, signs of greater economic stability are emerging. Inflation rates have decreased in both countries, potentially paving the way for lower interest rates across Europe, stimulating construction and retail activity. However, an impasse between cautious purchasing behavior from buyers and the need for factories to maintain prices due to higher raw material costs has been observed. Limited domestic supply, exacerbated by production issues at Liberty Steel plants, has contributed to recent price increases. Overall, suppressed demand is expected to persist in the European steel sector in the near term. Nevertheless, the potential EU funding for Poland, coupled with hopes of lower interest rates, has improved sentiment regarding the market outlook.
Source and Credit: metallurgprom.org
