EU STEEL PRICES EXPAND
AS MILL INPUT COSTS INCREASE
European strip mill product prices continued
to escalate, in December, driven by a sharp rise in raw material
costs. Moreover, third country import volumes were restricted, due
to trade defence measures, on both hot and cold rolled coil, and by
Chinese cuts in supply. The threat of an antidumping investigation
into galvanised steel imports from China also significantly slowed
the placement of new orders with Chinese producers.
Domestic mill order books are healthy and delivery lead times remain
extended. Steelmakers, keen to stay ahead of raw material cost
developments, announced further price hikes in late November. Buyers
expect the mills’ new targets to be achieved shortly and further
initiatives cannot be ruled out in the first trimester of 2017.
Strip mill product prices continue to advance, in Germany, as a
result of restricted supply, extended delivery lead times and the
surging cost of production at the mills. Steel buyers are keen to
secure quantities ahead of further rises. They state that a number
of producers are controlling volume flow on quarterly contracts.
Further price hikes are anticipated.
French steel demand is reasonable going into the last month of 2016.
Buyers are pre-empting their future requirements, following the
rapid price increases. Mills plan to build on this momentum and
continue to lift basis values for deliveries into the beginning of
next year. Buyers comment that quotations are only valid for a week
to ten days, then revised upwards. Imports are still very limited.
General steel demand, in Italy, is quite flat, with the major
exception of the auto industry, which continues to flourish. The
mechanical engineering sector is improving. Construction activity
continues to stagnate and, following the recent referendum, a new
phase of political instability is envisaged, which does not bode
well for future investment prospects. Strip mill product basis
figures soared in December, as a result of a dearth of imported
material, together with higher input costs at the steelmakers. A
significant amount of uncertainty exists in the market. Many buyers
fear that prices may go down again, as quickly as they have risen.
Service centres complain that their profitability is at risk as
resale customers are not yet willing to pay more. Consequently,
distributors purchase as little as possible.
Several continental European steelmakers are not supplying the UK
market, at present. Therefore, customers’ options are limited,
leaving them no choice but to pay the substantially higher prices
demanded by the domestic mills. They have been told to expect
material to be more expensive when April deliveries are negotiated.
Service centres are busy and resale values are moving up, enabling
them to preserve their profit margins. Distributors complain of a
lack of supply from the Far East. At times, deals were put together,
only to be subsequently withdrawn, to the frustration of potential
Belgian demand is relatively brisk. The increased cost of raw
materials forced ex-mill steel prices upwards. Very little
competition exists from overseas suppliers. European producers are
confident that further advances can be secured. A number of buyers
have limited the quantities they order because prices are so high.
Spanish manufacturing output continues to grow strongly. Steel
demand is satisfactory and forecast to increase a little in the
first quarter of 2017. The installation of a new government is
expected to create a more positive economic environment. Service
centre steel inventories are kept as low as possible for fear of
stock losses - should the new, higher prices not stick. Distributors
encountered difficulties with passing on the mill hikes to the
marketplace. Ongoing constrained supply led to much higher basis
numbers, in December.
Source: MEPS -
European Steel Review
- December 2016 Issue
MEPS - EU Steel
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