Uncertainties Plague EU
product basis prices began to stabilise in southern Europe, in
April, whilst small downward corrections were noted in the north.
Overall demand, in the region, is subdued. Sentiment is poor - badly
affected by the ongoing reduction in orders from the automotive
sector. Moreover, in many countries, concern exists about Brexit,
especially if a ‘no deal’ scenario is the outcome. The general
weakness of a number of key European economies, together with local
and European elections, in May, are exacerbating the feeling of
The substantial import tonnages that arrived at the start of the
year will take time to work through the supply chain. The
availability of this material allows buyers to adopt a ‘wait and
see’ attitude towards ordering from domestic sources.
In Germany, steel demand remains relatively low, due to the marked
slowdown in the auto sector. The typical first quarter restocking
process failed to materialise, this year. In the distribution
sector, severe competition has developed, as companies try to
generate cash by reducing stock levels. Pressure from end-users is
forcing them to reject the steelmakers’ price hike proposals,
because their margins are already being squeezed. The differential
between domestic and import prices is quite narrow.
In France, buyers negotiated limited discounts on their purchases of
strip mill products. Business activity is lacklustre, amidst
relatively high inventories. Customers note that a number of
domestic mills are selling quite aggressively in order to try to
fill their production schedules. They anticipate further price
declines. Those local service centres dealing primarily with the
auto industry are now experiencing a slowdown in volumes. Forecasts
suggest a drop of 5 percent, year-on-year, for tonnages sold to the
carmakers. Import offers are uncompetitive, currently.
Italian manufacturing business conditions continued to worsen, in
March. A rapid downturn in orders led to reduced output. This badly
affected the steel market. The recent uptick in strip mill product
prices came to a halt, with basis values stabilising or developing
marginal weakness. Downstream steel demand is dismal. Service
centres are under pressure from end-users, who are reluctant to pay
increased resale prices. Buyers are purchasing with extreme caution.
Downgraded economic growth forecasts, plus the impending European
elections, in May, provide additional uncertainties.
Mainland European mills have plenty of material to sell into the UK
market. For the moment, strip mill product selling values have been
maintained. Distributors report that demand, with the exception of
auto-related sectors, is holding up, despite the uncertainties
associated with Brexit. Distributors’ resale margins are tighter
than of late but still acceptable.
A lack of activity is noticeable in the Belgian market, in April.
Demand from end-users, both large and small, is weak. A number of
major service centres are offering promotional resale prices, in
order to reduce their inventories. As a result of this negative
scenario, the steelmakers, whose order books are poor, have
discounted basis values of strip mill products by around €10 per
tonne. MEPS notes little influence from imports, which are similarly
priced to material from European sources.
Spain’s manufacturing sector returned to growth, during March,
albeit only marginally. The steel market is relatively stable, with
regional variations between the north and south of the country.
Nevertheless, market sentiment is negative, due to the impact that
the approaching summer vacation period will have on demand and the
unwillingness of end-users to pay increased prices. New import
quotations are very similar to those from domestic suppliers.
Although service centre sales volumes are better than earlier in the
year, resale values do not reflect replacement costs.
Source: MEPS -
European Steel Review
- April 2019 Issue
Also See: MEPS
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