Activity in the European market for flat products slowed a little, ahead of the Easter holidays in early April. However, many domestic mills have delivery lead times extending into the end of June or even July, thanks to improved export business on the back of a weak euro. Second quarter prices in continental Europe are generally flat at similar levels to those in the first trimester. In contrast, price erosion continues in the UK as mainland European steel suppliers take advantage of currency movements which have enabled them to offer more cheaply than in the recent past.
The German market is quiet with few developments. Suppliers have continued to push for price increases but without any real success. In certain instances, customers may have paid slightly more but, overall, basis numbers for strip mill products are flat. Buyers are not expecting rises in the third trimester as mill costs are relatively low and demand is similar to 2014. At present, some customers are experiencing delays to their deliveries because of production problems at ThyssenKrupp. This has created a temporary feeling of supply tightness in some areas. However, the situation is expected to ease at the end of this month. Service centres continue to keep stock levels down. The utilisation rate in that sector is quite low and profit margins have shrunk.
A lack of substantial demand continues to mar the French market, where activity is still weak and producers are struggling to hold on to basis numbers. Prices are being affected by rising volumes of imported material. Chinese and Indian offers have now returned to European levels, despite the decline in value of the euro. There is not enough business available to satisfy all the distributors, who are finding it impossible to improve their poor margins. Market participants do not envisage any real improvement in the coming months.
With the exception of the auto sector, flat product consumption remains low in Italy. Mechanical engineering demand is particularly depressed. However, expectations are for a slow, if fragile, economic recovery. End-users refuse to pay more, so service centre profits are lacklustre. The weak euro is helping to deter prospective importers. Ilva is back in the market with offers for cold rolled and hot dipped galvanised coil, following an extended break. However, the volumes are small in comparison with past production levels.
UK distributors continue to report healthy business activity. Their sales in March were good and this has continued into April. Steelmakers are no longer pushing for increases. In reality, mill prices have declined again due to a weak euro, which has offered advantages to mainland European suppliers and allowed them to grow their market share. Although service centre resale values have fallen in tandem with the mill figures, margins remain acceptable.
The Belgian market is relatively stable. We have noted a small number of quarterly contracts being settled slightly higher than in the first trimester but, in general, basis figures are unchanged. Demand is rather quiet. Buyers expect little, or no, change before the summer holidays. However, there are some positive signals that activity will improve later in the year as the economy revives.
Despite attempts to lift basis figures further, suppliers to the Spanish market have been unable to secure increases. Customers are only purchasing for their immediate needs, although underlying demand is stable. Substantial volumes of third country material, due to arrive in June/July, could depress selling values in the summer. After increasing their prices when the euro first plummeted, overseas suppliers have now lowered their new offers back to the original level.
Source: MEPS – European Steel Review – April Issue