The European steel market continues to be affected by rising uncertainty. Trade with non-EU countries is considered a risk because of the possibility of sanctions being applied for material already contracted. Moreover, steel buyers, where possible, are postponing their purchasing decisions while they consider the potential outcome of the USA’s Section 232 legislation and the EC safeguard investigation. Consequently, as buying activity slowed, prices either stabilised or, particularly in the south of Europe, registered modest downward movements, in May. Underlying demand remains healthy, supported by favourable economic conditions.
The German manufacturing sector made a robust start to the second quarter, with output rising substantially. Mill order intake is healthy as end-users are, finally, forced into placing orders. However, in the distribution sector, sales activity slowed, in May. Recent strip mill business was negotiated at figures similar to last month’s values. Service centres are cutting their resale prices, often quite significantly, in order to try to stimulate sales. Import offers are not competitive.
French basis values were generally unchanged, in May. Buyers expect this stability to continue, despite the steelmakers’ attempts to obtain further rises. A number of distributors are satisfied with sales volumes, but others report a noticeable slowdown. Nonetheless, demand from the construction and auto industries remains healthy. The high number of public holidays and extended weekends, in the month of May, reduced the amount of business but activity is expected to recover, in June. Meanwhile, planned industrial unrest, resulting in strike action through to June, plus a shortage of available transport, is complicating delivery logistics.
The recent slowdown in growth in the Italian manufacturing sector continued during April. Steel buyers successfully negotiated discounts from the producers, during May settlements. This was, partly, a reaction to reduced import pricing. However, overseas offers are now becoming more expensive due to changes in the euro/US dollar exchange rate. Downstream customers are less busy and service centres have enough stock to allow them to postpone purchasing decisions.
At the start of the second quarter, UK manufacturing output continued to grow, albeit at a reduced rate. Distributors report that sales activity is slowly picking up. However, they still struggle to pass on mill increases, to their customers. A number of stockists note slightly improved resale prices, as cheaper inventories are now diminished. Both the auto and construction industries are underperforming. Basis values quoted by steelmakers, for third quarter delivery, are slightly lower than those reported in April.
No major price changes were noted in the Belgian market, in May. Service centres state that producers are unwilling to offer reductions prior to the summer holidays. Distributors only place orders for what they need each month. In the majority of cases, they can now incorporate the mill increases in their resale values to end-users. Deliveries from the domestic steelmakers are running late. Import pressure is lacking. Deals appear to be on hold as buyers await the outcome of the Section 232 measures.
The rate of expansion in manufacturing output increased in Spain, in April. Currently, the steel market is rather quiet, despite good underlying consumption. Expectations for lower prices, in the near future, have led to a ‘wait and see’ attitude amongst customers. Service centre inventories, although modest, are at a sufficient level to enable buyers to postpone placing new orders for large quantities. Quotations from overseas suppliers, with the exception of those for cold rolled coil, are unattractive. Domestic price corrections were noted for all strip mill categories, this month. Distributors failed to fully recoup recent mill hikes from their customers.
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