There has been no seasonal pickup in demand for strip mill products. Overcapacity persists in steelmaking and distribution. Furthermore, imported material, especially from Asia, is being offered at very competitive figures. As a result, the mills have failed to achieve price advances and, in some countries, small decreases in selling values have been recorded. Stockists, unless they are desperate for cash, are holding onto material, hoping for higher prices in the second quarter.
Distributors report substantial tonnages of hot rolled plate of Asian origin arriving in Europe. In the Nordic region, transaction values have also come under pressure from lower-priced imports from Russia and Eastern Europe. Although demand has been reasonable from some sectors and some locations, the trend in selling values across northern Europe has been downward, during the past month.
The tendency for long products prices has been distinctly negative in recent weeks. The market for drawing quality wire rod remains subdued and selling figures have slipped, a little. Demand for structural sections is expected to increase this year but, for now, mills are reducing their offer prices, influenced by lower scrap costs and the need to fill their rolling schedules. Despite mild weather and demand from some large infrastructure projects, consumption of reinforcing bars is disappointing and transaction values have decreased for the second month, in most countries. The reported growth in manufacturing activity in much of Europe has had little noticeable effect on consumption of merchant bar and prices fell, all over the north of the continent, in March.
European producers of flat steel products have, so far, failed to close deals for the second quarter at the target prices they initially announced. Falling input costs have hindered the mills’ aspirations. Moreover, offers from third country sources are becoming more competitive, although the lengthy delivery lead times involved are still considered to be a big risk in today’s market climate. Domestic steelmakers are hopeful that a small increase can be secured for orders placed over the next few weeks. Economic indicators remain good in several countries.
After a weak start to the year, demand from German end-users is now either stable or growing. However, customers are not yet ready to pay the proposed second trimester increase of €30/40 per tonne. Producers have already lowered their expectations to around €10/20 per tonne.
The French market has been described as lethargic, lacking dynamism, with stagnant average demand since January and even sagging end-user activity. In such conditions, it has not been possible for producers to lift their prices.
In Italy, market players are viewing the changing political environment with great caution. MEPS has noted a number of negative developments in the steel sector. End-user activity has slowed, creating pressure in the distribution segment. The mills have become more flexible in their attitude during price negotiations.
In the UK, the announced increases have not filtered through to the market. The strong local currency is working in the favour of importers, both from mainland Europe and from third countries. Service centres report that demand is still reasonably good but may have slowed a little.
In Spain, there is still pressure from domestic producers to lift basis figures for second quarter business but import offers are becoming cheaper. Consequently, for now, customers are reluctant to accept increases. End-users are also refusing to pay more to the distributors.
Source: MEPS – European Steel Review
Steel market participants have, for some time, been predicting a moderate pickup in steel sales volumes and prices, in northern Europe, during the first half of 2014. Although there has been no spectacular increase in tonnages, the mills schedules are filling and delivery lead times are lengthening. Selling values for most products have recorded small advances, in January, in the majority of countries reviewed. In all other cases, gains are anticipated in the near future.
Coil producers need increased prices in order to be profitable. Accordingly, they have proposed higher numbers for January or first quarter contracts. While the new figures were not immediately accepted in all instances, buyers concede that values will rise in the near term. Offers from third country suppliers are only marginally cheaper than from European mills and are, therefore not attractive.
The market for reversing mill plate remains weak compared to that for strip mill products. Transaction values have risen slightly in Sweden. Market participants in other countries foresee possible small increases during the first half of this year, although some sellers believe they may have to wait until the second quarter to achieve higher volumes and prices.
There has been no severe winter weather, so far, in northern Europe. Consequently, demand for long products, from the construction sector, has held up at a higher level than is normal for this time of year. Furthermore, scrap prices increased in December. As result, transaction values for structural sections rose, in most countries, in January. On the other hand, rebar prices, in most instances remained stable. Merchant bar values have recorded moderate advances, supported by improving demand from the manufacturing sector.
Source: European Steel Review Supplement
Service centres in the US flat products market report a slower than anticipated start to 2014. Although ex-mill transaction values have increased, there does not appear to be much upward demand pressure at present. Steelmakers continue to announce cost-driven price hikes as scrap escalates. Inventories throughout the supply chain are light. As prices rise, producers are closely watching the import situation. For now, buyers are showing little interest in offshore material.
The Chinese market is quiet ahead of the week-long New Year celebrations at the end of this month. Traders are keen to offload their stock and prices have fallen accordingly. Softening raw material costs are hindering the situation.
Economic conditions are improving rapidly in Japan, creating a perfect climate for the steelmakers’, much needed, price rises. The weak currency continues to deter overseas suppliers. However, it is also making imported raw materials more expensive. A number of producers are also concerned about escalating electricity charges. Export business is weaker as demand in the key Asian markets is dull and supply remains in surplus.
The South Korean domestic steel market is slow to recover and overseas sales are also lacklustre. Local mills have a multitude of trade cases outstanding against them at present. Despite high input costs, steelmakers are unable to lift their prices.
The Polish economy is on the mend, with new investments from the European Commission helping to boost activity. Proposed mill price rises of €40 per tonne have not yet been implemented.
It is difficult to assess the future direction of the Czech/Slovak steel market at present. However, there does appear to be some underlying optimism. Transaction numbers have moved up this month and buyers are expecting stability from now on.
According to the latest report from MEPS International Ltd, there has been very little activity in the European flat products market in the first two weeks following the Christmas and New Year holidays. The domestic mills still have little competition from third country suppliers who are offering at similar levels but with much longer delivery lead times. MEPS noted some small basis increases in several countries in late December when producers withdrew most of their cheapest deals. Steelmakers do not consider that current prices are satisfactory and insist they need to lift them by €30/40 per tonne for April deliveries. Most first half 2014 contracts with the auto industry have been concluded at the same price as in the second half of last year.
In the German market, many companies that did not order from the mills at the end of 2013 may now need to restock. So far, there has been only steady purchasing activity. Chinese suppliers are trying to sell material but their offers are at similar levels to those from the domestic producers.
The French market started up very slowly, following the end-of-year break. Market participants expect only a small number of new orders to be placed before mid-January. The mills are currently consolidating the modest rise obtained in December and pushing for further increases.
MEPS reported a marginal improvement in Italian flat product basis numbers but there is a great deal of caution in the market. Sales have been better than expected but economic recovery is likely to be very fragile. Business at Ilva’s Taranto works has not fully returned to normality, although there should be less uncertainty from now on.
Growing optimism has developed in the UK steel industry. However, the strengthening pound makes the market more vulnerable to import offers, whilst at the same time stifling exports. A number of service centres report a promising start to 2014 and November was the busiest month of last year for large stockholders. Resale values are reasonably firm. The basis figures we last reported for January business also apply now for February. Steelmakers are hoping to achieve higher selling figures for March but demand will dictate how hard they push. Mainland European suppliers are already benefiting from the currency exchange rate differential.
Source: MEPS – European Steel Review
Also See: MEPS – EU Steel Prices Online