The recent US announcement of a 25 percent tariff on steel imports certainly created a great deal of speculation and uncertainty in the EU market. It dominated discussions during MEPS research, in March. However, purchasing and prices were not directly affected by the news.
European strip mill product basis values continue to move up. Figures are still below the steelmakers’ proposed minimum target levels but producers appear confident that these will be reached. The initiative is supported by good order books, extending delivery lead times and the low availability of imports, as a result of trade defence measures. Moreover, quotations from third country suppliers remain largely uncompetitive.
Despite easing, in February, manufacturing output growth remains high, in Germany. This is reflected in strong steel demand. Recent strip mill product business was negotiated at figures above those reported, last month, but not yet at the minimum target levels proposed by the domestic steelmakers. Order intake at the domestic mills is positive and delivery lead times continue to lengthen. Distributors’ stock levels are acceptable when compared with expected activity levels. Third country imports are available but buyers consider that prices are too high to be competitive.
In France, activity, in the main steel consuming sectors of automotive and construction, is good. This, together with a lack of imports, helped, once again, to push up strip mill product basis values, in March. Nonetheless, several stockholders report quite high inventories and, consequently, no immediate need to purchase. School holidays and adverse weather conditions – floods and snow – slowed demand in late February and delayed deliveries from a number of mills. Steelmakers continue to claim further price rises into the second trimester.
The Italian steel market is quiet, at present, with substantial speculation surrounding the political situation. First quarter ordering is finalised. Now, as steelmakers demand high prices for the second trimester, buyers, especially service centres, are postponing purchasing decisions as they are loath to pay more. Distributors are already struggling to pass on recent mill increases to their customers. Resale values are undermined by the large number of small, family-owned, stockists who are able to operate on a low fixed cost model. Underlying demand remains in a state of recovery but restocking is now complete. Flat product basis figures rose, in March, although the pace of the increase slowed. Attractive third country offers are scarce.
UK demand remains subdued. However, a number of distributors reported a slight improvement in activity over recent weeks. Inventories are reducing. Nevertheless, they are still too high at several service centres, creating negative pressure on resale values, despite higher mill prices. Third country quotations are limited. Those that do exist continue to be unacceptable to many buyers. Port stocks are at their lowest for several years.
In Belgium, basis values continue to escalate. Further rises are anticipated. Domestic delivery lead times are well into the second quarter, with a number of mills quoting for the third trimester. Demand is brisk and customers are optimistic regarding future business levels, as the economy continues to perform well. Offers from third country sources are hard to locate. Service centres report that implementing replacement costs into their selling prices to end-users remains problematic.
The Spanish steel sector is performing well, with good demand. Distributors of strip mill products are busy. Service centre stocks are considered to be at the correct level for today’s operations. In March, buyers settled orders for May delivery at higher prices than in the previous month. Although distributors’ selling values are also rising, they are still some way from transferring the recent mill increase to their customers. Margins remain acceptable only because inventories still contain cheaper material. As European basis figures moved up, a number of companies closed deals with overseas suppliers. However, the volumes involved were quite small.
Source: MEPS – European Steel Review – March 2018 Issue