European Steel Prices
Approaching Bottom of The Current Cycle
activity, resale values and sentiment remain weak, in the European
strip mill products market, in November. Slow economic growth,
global trade conflicts and political difficulties have added to the
air of pessimism. A lack of orders, from the auto sector, in
particular, continues to have a significant negative effect on
overall demand. Basis values are under downward pressure. Domestic
delivery lead times are short, allowing customers either to postpone
buying decisions, or to purchase only small quantities.
On a brighter note, price offers from third country suppliers began
to rise. For the moment, Ilva is not accepting new orders, because
of the withdrawal of ArcelorMittal from the deal with the Italian
government to take over the company. If this situation persists, it
should help to tighten supply throughout Europe, adding to the
capacity cuts already in place at other steelmakers. Moreover, a
number of buyers believe that prices are reaching the bottom for
this cycle. Consequently, a degree of inventory replenishment may
get underway, following a prolonged destocking phase.
The German market for strip mill products is quiet. Business levels
are low. Basis prices continue to fall. Steelmakers are lacking
orders due to the significantly reduced activity in the auto
industry. Machinery manufacture is also under pressure. Producers
continue to offer discounts in order to try to generate sales and
compete against imports. Service centre inventories are gradually
declining but remain in excess, compared with today’s low demand.
End-user activity has, generally, remained quite good, in France,
with the exception of the slowdown now taking place in the auto
sector. Demand from the rest of industry is reasonable. However,
customers are aware that they can obtain good discounts, with quick
deliveries. Prices continued to decrease, in November, but some
stabilisation is now noted. Despite production cuts, several
steelmakers are still struggling to fill their order books.
Competitive offers from overseas suppliers remain plentiful.
In Italy, mills are attempting to lift strip mill product prices,
citing the recent ownership problem at Ilva, which is expected to
lead to much tighter supply. For the moment, availability is ample.
Demand remains very weak, with producers still prepared to lower
their offers in order to secure orders. Delivery lead times remain
relatively short. Pressure from third country imports eased
recently. Indian suppliers are less active. Turkish quotations
increased in price, albeit only slightly, due to a pickup in
activity in their home market. Distributors report further negative
pressure on their resale values.
In the UK, many service centres report a lack of demand. Those
supplying the auto sector are most badly hit. Credit insurers are
wary due to the recent insolvencies at several large distributors.
Consequently, credit limits have tightened. However, a number of
stockholders report good business in September/October, in terms of
volumes and margins. Nevertheless, mill prices are moving down,
quite rapidly, for deliveries in January 2020. Imports are
particularly attractive, since the pound sterling strengthened.
Material is available from India, Brazil, South Korea and Turkey.
Inventories are still being run down.
In Belgium, steel demand remains weak. Stock levels are high.
End-users only buy for their short-term needs. Steelmakers are
chasing orders and cutting output. Negative price pressure persists.
Market sentiment needs to improve before any revival takes place.
Large service centres are also keen to make sales, in order to
improve turnover and reduce inventories before the year-end. Intense
competition in the distribution sector led to further discounting.
After October’s rapid deterioration in strip mill product prices,
the negative trend persisted into November, in Spain. Customers
continue to purchase only for their immediate needs, even though
many buyers believe selling values have now reached the bottom for
this cycle. Service centres report that sales volumes in the general
market are acceptable. Construction demand is stable. Demand from
the auto sector is likely to continue to fall in 2020, although the
drop will be far less dramatic than in recent times. At the service
centres, resale margins remain very low.
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