Metal sector stalls: orders drop and credit dries up

The metal sector stops buying: orders fall and credit tightens

The diagnosis has a date and a name: the European industry is stalling, and the metal sector feels it first. This is not a hunch. It is what buyers of sheet, coil, and wire report weekly, and what manufacturing activity indices in Spain and the eurozone confirm, showing two consecutive months of contraction. The uncomfortable core thesis is that after years of cheap money, companies new to high rates are seeing financing costs rise and portfolios shrink.

From 'no investment' to workforce cuts

The conversation starts with a bleak prediction: no one is investing, no one needs anything. The forecast is that the pause will be clear between August and September, with many holidays turning into state-paid unemployment, and a worse scenario by Christmas. The benchmark cited is ArcelorMittal: if the steel giant is slowing, the constellation of small distributors cutting angles, beams, and tubes is struggling even more.

The counterargument is logical: a sheet metal and metalworking distributor is not a national economic thermometer. There are thousands, living in permanent crisis. The counterexample is a mechanic with a three-week wait for servicing, with labor costs rising every six months. The dispute is about which signal to trust.

Banks change rules: from 100% financing to requiring audits

Here, the story becomes verifiable. Equipment sector workers describe the banking shift in detail. In 2022, a VAT model 303 and financial statements covered 100% of any operation, whether loan, leasing, or renting. Now, banks finance only part and explicitly require other entities to get involved. The specific case: a machine for 350,000 euros plus a complementary feeder for 175,000 euros. Both go together or neither works. The bank financed only one.

This is compounded by paperwork. Without an audit report, nothing moves, whereas previously a balance sheet and profit-and-loss statement from the ERP sufficed. The collateral effect is worsening industrial risk ratings and restricted credit for projects that passed easily a year ago.

Numbers that add up: from 1.1 million to 150,000 euros

The harshest case is not a prediction, but a dismissal. A metal and electrical machinery worker reports his company dropped from 1.1 million euros to 150,000 euros in the same period, an 85 % drop, with a downward trend. The sequence describes any industrial recession: first, future work is cut; then, stock piles up to keep machines running; finally, cuts are made. He received his severance.

Parallel signals appear in the same chain. Scrap metal prices, usually higher in Europe than Spain, have inverted, and the sector expects a sharp, near-term adjustment. Celsa, a major steel producer, is in a delicate situation. Yet, in the Pamplona-Zaragoza-Lérida axis, welders are in demand, aluminum has stock, and steel is neither scarce nor abundant: the perfect thermometer of stagnation.

Why hasn't tourism fallen yet?

Because not all of the country moves at once. In the south, coast, and tourist interior, a full-steam summer is described, with impossible prices still being charged and rural houses booked a year in advance. The other side comes from those renting rural houses for groups: cancellations and few new bookings, a strong drop in large family house segments. This is the classic leading indicator: discretionary group spending is the first to be cut.

Figures are cited in the thread: the services sector accounts for 67 % of Spain's GDP, while agriculture is under 3 %. Here lies the trap in all forecasts: a country focused on services takes longer to show industrial cold. Summer deceives; September examines.

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With manufacturing PMIs in contraction and services holding, the two narratives coexist without reconciling. Workforce cuts have a name and a figure. The date of the collapse, however, does not.