INCREASED RAW MATERIAL
COSTS PUSHING STEEL PRICES UPWARDS
According to MEPS (International) Ltd, the
recent spike in coking coal costs gave support to the European
steelmakers’ determined attempts to hike strip mill product prices,
in November. Mill order books are relatively healthy and delivery
lead times remain extended, although buyers seem less worried about
availability, now. The proposed rises continue to be accepted, at
least in part, but service centres are concerned because their
customers are progressively more reluctant to accept higher prices.
Trade defence measures, on both hot and cold rolled coil, together
with higher prices demanded by many overseas suppliers, continue to
restrict import volumes.
German manufacturing output is good, leading to solid steel demand.
However, buyers complain that the improvement is not sufficient to
justify current mill price hike proposals. German service centres
are not fully recouping the steelmakers’ increases. Nevertheless,
strip mill product basis values continue to advance as a result of
restricted supply and extended delivery lead times. Buyers expect
that steel will become more expensive as mill costs surge but are
not convinced that producers will achieve their target figures.
Even though there is little change in French activity levels, prices
continue to strengthen. Producers are looking to implement further
increases. The auto industry is boosting demand, whilst the lack of
imports limits supply. Mill delivery lead times stretch to the end
of January. Buyers report that availability is constrained.
Activity in the Italian market is sluggish, with the exception of
the vehicle manufacturing sector, which is running well. However,
tight supply, resulting from a dearth of imported material, together
with delayed deliveries from European mills, continues to force
basis values up. Service centres cannot pass on the full amount of
the hikes to end-users, which is limiting their profitability.
Significant upward price movements were noted in the UK, for
February shipments. Buyers expect similar increases when March
negotiations are concluded. Delivery lead times are long and there
is a lack of competition from third country sources. Moreover, the
pound sterling is weak. Distributors report good sales activity in
October, with November starting well. The majority of service
centres state that they continue to apply the mill increases to
resale values. Stock levels remain low due to supply shortfalls.
Belgian demand is brisk. Domestic steelmakers have full order books,
with very little competition from overseas suppliers. Prices
continue on an upward trend. European producers appear confident
that further increases can be secured. Deliveries are already into
Spanish manufacturing output continued to grow, in October. Steel
demand is relatively stable with great expectations for public
investment now that a new government has, finally, been established.
Service centre sales volumes are at an acceptable level but
difficulties occur when distributors try to translate mill increases
into the marketplace. Inventory levels are normal-to-low. Ongoing
constrained supply led to higher basis numbers, in November.
European producers wish to implement further increases.
Competitively-priced products, from third country sources not
affected by the current antidumping measures, have been purchased,
for arrival February 2017. New offers from overseas are more
Source: MEPS -
European Steel Review
- November 2016 Issue
MEPS - EU Steel
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