Strip mill product basis prices began to stabilise in southern Europe, in April, whilst small downward corrections were noted in the north. Overall demand, in the region, is subdued. Sentiment is poor – badly affected by the ongoing reduction in orders from the automotive sector. Moreover, in many countries, concern exists about Brexit, especially if a ‘no deal’ scenario is the outcome. The general weakness of a number of key European economies, together with local and European elections, in May, are exacerbating the feeling of uncertainty.

The substantial import tonnages that arrived at the start of the year will take time to work through the supply chain. The availability of this material allows buyers to adopt a ‘wait and see’ attitude towards ordering from domestic sources. 

In Germany, steel demand remains relatively low, due to the marked slowdown in the auto sector. The typical first quarter restocking process failed to materialise, this year. In the distribution sector, severe competition has developed, as companies try to generate cash by reducing stock levels. Pressure from end-users is forcing them to reject the steelmakers’ price hike proposals, because their margins are already being squeezed. The differential between domestic and import prices is quite narrow.

In France, buyers negotiated limited discounts on their purchases of strip mill products. Business activity is lacklustre, amidst relatively high inventories. Customers note that a number of domestic mills are selling quite aggressively in order to try to fill their production schedules. They anticipate further price declines. Those local service centres dealing primarily with the auto industry are now experiencing a slowdown in volumes. Forecasts suggest a drop of 5 percent, year-on-year, for tonnages sold to the carmakers. Import offers are uncompetitive, currently.

Italian manufacturing business conditions continued to worsen, in March. A rapid downturn in orders led to reduced output. This badly affected the steel market. The recent uptick in strip mill product prices came to a halt, with basis values stabilising or developing marginal weakness. Downstream steel demand is dismal. Service centres are under pressure from end-users, who are reluctant to pay increased resale prices. Buyers are purchasing with extreme caution. Downgraded economic growth forecasts, plus the impending European elections, in May, provide additional uncertainties.

Mainland European mills have plenty of material to sell into the UK market. For the moment, strip mill product selling values have been maintained. Distributors report that demand, with the exception of auto-related sectors, is holding up, despite the uncertainties associated with Brexit. Distributors’ resale margins are tighter than of late but still acceptable.

A lack of activity is noticeable in the Belgian market, in April. Demand from end-users, both large and small, is weak. A number of major service centres are offering promotional resale prices, in order to reduce their inventories. As a result of this negative scenario, the steelmakers, whose order books are poor, have discounted basis values of strip mill products by around €10 per tonne. MEPS notes little influence from imports, which are similarly priced to material from European sources.

Spain’s manufacturing sector returned to growth, during March, albeit only marginally. The steel market is relatively stable, with regional variations between the north and south of the country. Nevertheless, market sentiment is negative, due to the impact that the approaching summer vacation period will have on demand and the unwillingness of end-users to pay increased prices. New import quotations are very similar to those from domestic suppliers. Although service centre sales volumes are better than earlier in the year, resale values do not reflect replacement costs.

Source: MEPS European Steel Review