Despite strengthening demand in a number of west European countries, flat product domestic selling values are being negatively influenced by the availability of very low-priced third country import offers. Cheaper raw material and energy costs are contributing to the situation. Market sources are quite pessimistic about the coming months. As a result, buyers expect further price reductions.

In Germany, the auto sector continues to perform well but has slowed a little, as a result of a fall in sales to China, brought about by currency exchange rate changes. The construction industry is also slowing as the winter season approaches. Service centre stocks are quite full after the holidays. However, end-users are only taking what they need for immediate use, as they anticipate even lower prices in the future. Consequently, resale values are under pressure.

The French market was muted at the beginning of September. Activity was expected to pick up, slightly, towards the end of the month, due to restocking. Market participants foresee their order books at similar levels to those in previous months. They believe that the difficult situation in China and other regions represent a threat. Producers have tried to resist negative price pressure with mixed results.

The Italian steel market has deteriorated over the summer, leading to feelings of insecurity amongst buyers and sellers alike, despite signs of some small recovery in the general economic situation. Cheap imported material is the major disruptive factor. On the demand side, the auto sector is performing well, thanks to investment in new models. The mechanical engineering segment saw some improvements at the start of the summer. Service centres report that their sales volumes are positive, compared with earlier in the year, but resale prices are poor. Competition in that sector is severe.

In the UK, distributors report that demand has remained good but that their buying prices have fallen, for the fourth quarter. Resale values have moved down, slowly and steadily, in tandem with mill figures. Service centre inventories are low relative to demand. Traders’ stocks at the docks are also depleted as caution prevails.

Prices remain on a slow, downward trend in Belgium. Turkish and Chinese imports are available. Even if customers do not purchase this cheap material, because of the long delivery lead time involved, they use the low figures in negotiations with their European suppliers in order to obtain discounts. Companies do not need to build stocks as steel can be acquired very quickly.

A massive increase in the availability of cheap third country imports occurred in the Spanish market during the summer. This has led to a series of domestic basis price reductions for November rollings of all flat products. As there is still a large differential between local and foreign figures, buyers expect further discounting for December. Underlying demand is reasonable. There has been a sharp impact on distributors’ resale values since July. Margins have been squeezed.

Source: MEPS – European Steel Review – September 2015 Issue