European Steel Buyers
Expect Further Price Cuts Before Year-End
regional steelmakers’ attempts to lift basis values, in order to
restore profit margins, European strip mill product prices moved
downwards, in October. Market activity deteriorated noticeably. The
lack of orders from the automotive sector continues to have a
negative effect on overall demand. Mill delivery lead times are
short, allowing customers to either postpone purchasing decisions or
to buy only small quantities.
Procurement by distributors is still weak, due to concerns about
their resale margins. The year-end is approaching. As a result,
businesses are reducing stocks. Mills are keen to book orders but
most market participants, expecting even lower prices in the
immediate future, remain very cautious. Moreover, global trade
tensions, plus political and economic uncertainties, persist.
Notwithstanding recent cutbacks in production by the major mills,
customers perceive no significant supply tightness.
Strip mill product prices continue to fall, in the German market.
The lack of activity in the auto industry creates negativity in the
economy as a whole. Machinery manufacture is also under pressure,
after many years of growth. The slowdown in steel demand left large
gaps in mill order books. Steelmakers are offering discounts to
generate sales. Nevertheless, buyers will only negotiate for their
short-term requirements. Third country imports play a minor role in
buyers’ decision making, at present, as customers expect domestic
values to decrease further.
End-user activity was generally good on the French market, in
October, but prices continued to fall. Apparent demand is very low.
Mills struggle to fill their order books. A further slowdown is
expected, in an atmosphere of continuously decreasing prices. A
number of service centres report a drop in sales volumes of around
15 percent. Those dealing with the auto sector still enjoy
reasonable margins. For the rest of industry, profits have
A number of issues afflict the Italian steel sector. The economic
outlook is negative, with automotive, construction and mechanical
engineering performing poorly. Service centres continue to destock.
Resale values are very low. Supplying mills can deliver almost
immediately, negating the need for buyers to order large quantities.
Moreover, scrap prices have been steadily revised downwards, over
the past nine months. Domestic strip mill product values came under
renewed negative pressure, in October, as importers’ offers became
UK basis figures continue to decline, this month, due to very low
demand. Customers refrain from concluding deals because of the
downward price trend. Moreover, many service centres are already
covered for their current needs. Speculative purchases are being
avoided due to Brexit uncertainty. Steelmakers offered further
discounts. Customers see no signs of any short-term recovery.
Although distributors’ resale values are weakening, a number report
that profit margins remain acceptable.
In Belgium, conditions are weak, with pessimistic forecasts for
2020. Fifteen to twenty percent of Belgium’s industrial production
is supplied to companies in Germany. The economic downturn in that
country has a severe impact on suppliers in Belgium. End-users are
only buying for their short-term needs. Mills are chasing orders and
cutting output. Large service centres are also keen to sell in order
to improve turnover and to reduce inventories before the year-end.
Intense competition in the distribution sector led to discounting.
Mill basis values came under renewed pressure, in October.
Market participants, in Spain’s steel sector, were surprised by the
rapid decline in strip mill product prices, during late
September/October. A lack of activity and the recent drop in scrap
expenditure were catalysts for the negative price trend. The
situation was aggravated by the fact that, as prices plummeted,
buyers adopted a “wait and see” position, before making further
purchases. Uncertainty, both political and economic, will do little
to reverse the current situation, during the remainder of this year.
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