steel coils

Cautious Buying Persists as EU Mills Attempt Price Hikes

Attempts, by a number of EU mills, to lift prices for strip mill products, were limited, during the past four weeks. Buyers across northern Europe inform MEPS that they were able to negotiate rollover values, or even small discounts, with regional steel producers. Meanwhile, a small price upturn is noted in the Italian market.

Steelmakers’ profit margins are being squeezed. Nonetheless, the current imbalance between supply and demand is restricting the mills’ ability to lift steel selling figures. Furthermore, several regional steel producers, needing to fill their order books, did not follow the recent price hike initiative of the first tier suppliers.

Many EU steel distributors continue to purchase cautiously, concerned about their own tight resale margins. They lack confidence that they will be able to pass the producers’ proposed price hikes on to their customers. 

Nonetheless, European coil values appear to have reached the bottom of the current cycle. Elevated mill input expenditure should prevent steel prices from falling further. Moreover, steelmakers are actively trying to redress the supply/demand imbalance by cutting production.

ArcelorMittal had previously announced its intention to reduce output from its sites in Italy, Spain and Poland. Subsequently, the company issued details of additional supply restrictions in Spain and production cuts in France and Germany. Other EU steelmakers are, reportedly, reducing output by bringing forward, or extending, summer maintenance programmes at their facilities.

Another factor affecting supply is the European Commission’s import quotas. The EC is currently expediting a scheduled review of the safeguard measures, which was originally intended to be concluded by September 30, 2019. Various groups are lobbying for their own proposed amendments, with the current measures, seemingly, satisfying the requirements of few steel supply chain participants. Some parties wish for the quota allowances, for certain product categories, to be tightened up, and for it to be set country by country, rather than being on a global basis. Others want the reverse of these proposals. 

Although unlikely to be altered, one feature of the EC measures that appears to be to the detriment of the majority of affected groups is the quarterly aspect of the quota system. Having three-month periods encourages buyers to rush to purchase material, which can then languish at the ports waiting for the opening of the new quota allowance. This disrupts the traditional steady flow of material into the market, which is an important feature of the supply chain.

Source: MEPS European Steel Review