Structural issues in the European steel making industry need to be addressed, according to Jeff Largey, mining analyst at Macquarie Group, as steel prices look set to decline.
Largey said oversupply was a "major issue," and argued that the reason for a lack of recovery in European steelmaking was domestic.
"At this point in Europe you probably have 200 million tons of crude steel making capacity. Demand has been running more say at 150-160 (tonnes)," he told CNBC Monday. "So any time prices start to show a little life more supply gets turned on and it just kills any sort of rally."
Largey added that some steelmakers had rested on their laurels, waiting for an improving macro picture to boost steel prices. But analyst forecasts make any significant price increases look unlikely.
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Carbon HRC, or hot roiled coil, European steel prices currently linger around $624 per ton, but in a recent research note, Societe Generale said prices were likely to fall in the near-term.