BOOSTS EU STEEL PRICES
European strip mill product prices continued
to strengthen, in January. The substantial upward pressure from raw
material costs diminished. However, supply remained extremely tight
and domestic mill delivery lead times stretched into the second
quarter. Moreover, third country import volumes were very
restricted, due to trade defence measures and high third country
Purchasing activity in the immediate run-up to Christmas was subdued
but steelmakers report increased order intake, in early January.
Underlying demand is firm. Producers are looking to implement
further increases in the second half of the month, when trading
resumes properly. They continue to be very strict on pricing policy.
Germany’s manufacturing sector was buoyant at the end of 2016, with
continuing growth. This year is forecast to be at a similar level,
or even higher. Consequently, steel demand remains healthy. Strip
mill products basis values continue to advance as a result of
restricted supply and extended delivery lead times. Buyers believe
that the steelmakers will continue to take advantage of the
situation by claiming even higher prices in the short term. Service
centre stocks are described as mid-range to low. Resale values are
Buying activity remains moderate in the French market, except from
the auto industry, which continues to boost demand, especially for
coated coils. The absence of imports has caused availability
problems, with domestic mill delivery lead times now stretching to
April. In this context, EU producers intend to propose further price
increases, which are likely to be accepted. Half-yearly contracts
with the auto sector were settled at levels significantly above
those of the previous six months. Spot market values, for the rest
of industry, moved up a little in late December.
Italian strip mill product basis figures moved up, towards the end
of last month, driven by tight supply. Antidumping legislation led
to a considerable drop in import volumes, whilst delivery lead times
from European steelmakers were extended. Transactions were slow at
the start of 2017 as most companies did not return from the
Christmas holidays until January 9. Service centre inventories are
on the high side, due to speculative purchasing during
September/October, when steel prices were low. Resale values remain
depressed as some distributors continue to ignore the costs of
UK stockists are now heavily dependent on imported steel from
continental Europe. Consequently, the weaker pound sterling creates
additional upward price pressure. Suppliers are likely to impose an
increase in excess of £30/40 per tonne for April business.
Distributors’ sales were steady in early January, as resale values
continued to move up, enabling them to preserve their profitability.
Quantities are still very limited in the Belgian market. Although
basis numbers continue to rise, we detect more price stability.
Buyers expect producers to push for further hikes, once new
negotiations are underway. Service centres are reluctant to pay more
because they have failed to pass on the full amount of previous mill
rises to their customers.
Spanish steel demand is stable, or even expanding a little, as
growth in the manufacturing sector continues to strengthen. The
outlook for 2017 is positive. Ongoing constrained supply is expected
to lead to higher basis numbers, once new negotiations are
concluded. Customers expect a rise of at least another €20/30 per
tonne, next month. Distributors still encounter difficulties when
trying to pass on mill hikes to the marketplace.
Source: MEPS -
European Steel Review
- January 2017 Issue
MEPS - EU Steel
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