Confusion Reigns in EU
mill product prices declined for the fifth consecutive month, in
February. Buyers remain extremely cautious. Market sentiment is
gloomy, due to numerous economic and political uncertainties.
Moreover, customers perceive a lack of clarity regarding steel
imports, particularly with reference to the EC definitive safeguard
measures and their potential impact on the market. Regional mills
have spare capacity, due to a substantial reduction in orders from
vehicle manufacturers. Inventories, especially at the service
centres, remain adequate, for current requirements, allowing
customers to wait and assess how the market develops.
Nevertheless, a number of factors could bring a new dimension to
future pricing. Price hikes have been proposed for strip mill
products, with immediate effect. Import quotations from third
country suppliers are also higher than those one month ago. Mill
input costs are rising rapidly, following the dam collapse at
Brazilian iron ore producer, Vale. Floods in Queensland, Australia,
which caused the temporary closure of Abbot Point coking coal export
terminal, added to the rising expenditure.
Conditions in the German manufacturing sector deteriorated, at the
start of 2019. Trade tensions and a slowing auto sector undermined
steel demand. Order intake at the steelmakers remains weak. Strip
mill product prices continued to slide, in February. Service centre
inventories are medium to high. Their sales are below expectations.
Buyers are wary – ordering only for their immediate requirements.
Offers from overseas sources are more expensive than one month ago.
In France, distributors report good activity, but resale prices
remain under negative pressure. Purchase volumes from the auto
industry are better than anticipated, after the market slowdown in
the last two months of 2018. Nevertheless, strip mills continued to
make price concessions, in February. With rising raw material costs,
plus the new EC definitive quotas taking effect, several buyers
believe that conditions are now more favourable for price rises.
Manufacturing output declined sharply, in Italy, in January. The
downstream steel market is extremely weak. As a result, strip mill
product demand and prices are suffering. Delivery lead times from
local mills are very short. Despite proposed increases, basis values
continued to move down, in late January/early February. As service
centres’ inventories remain on the high side, MEPS detects little
reason for them to purchase large volumes. Resale margins continue
to be squeezed.
UK manufacturing activity slowed, in January. Ex-mill basis values
were largely unchanged, in February. European mills announced their
intention to increase prices for the second quarter, but some deals
for April/May are already concluded at current levels. Overseas
suppliers are also raising their quotations. However, traders’
prices for port stocks are quite reasonable. Inventories are
relatively high at auto-related service centres because of the
downturn in the carmaking industry. Distributors’ margins are
tighter than of late but still acceptable.
In Belgium, economic growth is lower than previously expected. Some
large investment decisions have been postponed. In the steel market,
both end-users and stockholders are in ‘wait and see’ mode, as
uncertainty persists. Further downward price pressure, on strip mill
products, was noted, in February. A number of buyers believe that
the bottom is now reached, since the EC announced new duties on some
A positive start to 2019 was registered in Spain’s manufacturing
sector. Meanwhile, steel buyers continue to push for discounts and
local producers adjust basis values downwards, for March deliveries.
However, customers do not expect further decreases. They anticipate
that steelmakers will achieve, at least, a portion of their €30 per
tonne price hike proposal. Service centre sales picked up, in terms
of volume, in February. However, resale values do not reflect
replacement costs. Distributors hope that planned mill price
increases will help them to recover lost margins.
Source: MEPS -
European Steel Review
- February 2019 Issue
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