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Home > MEPS Steel News - 22.05.2013

NO SPRING UPTURN IN SIGHT FOR EU STEEL PRICES - MEPS

Underlying demand for flat products remains subdued in Europe, ruling out any chance of price recovery, despite the high costs of production. Moreover, the market is oversupplied due to a number of blast furnace restarts at the beginning of the year. Basis values are generally down in all member states. The competition for orders is purely between European suppliers, since there is very little third country competition. As the euro is stronger now, any increase in local prices could start to attract more imports.

Although still fair, the German economic situation is weaker than in 2012. There has been no real improvement in steel demand, causing the mills to reduce prices again in May, with some customers voicing calls for further decreases in the third quarter. Buyers are only ordering what they need and are refusing to rebuild stocks because they believe the price trend will remain negative. Service centre resale values are very low as they rush to offload relatively expensive stock.

Activity remains weak in France. Some market participants found that end-user demand improved slightly in April compared with the previous month, which was poor. Others see the situation as stable or deteriorating with end-users' order books “melting like snow in the sun”. The first part of May saw little business being concluded due to the three public holidays. Basis figures are lower than in April. However, the mills are becoming more reluctant to offer discounts because they are losing money. Some producers are even talking of increases but this is unlikely to happen, given the general economic environment. Distributors’ resale prices have also continued to fall.

Despite reductions in mill output, Italian basis numbers continue to weaken. There is a great deal of uncertainty as consumption erodes, both at home and in export markets. Domestic business activity is low with very few large quantity orders. Most companies are focusing on reducing inventories to the absolute minimum. Service centres claim that their biggest concern is credit control as customers, many in dire financial difficulty, are suspending payments for long periods of time. Traders are finding business conditions difficult.

Mainland European producers appear keen to secure orders in the UK, where basis numbers are strong, despite drifting downwards this month. The majority of the recent increases have now been lost, partly due to oversupply. Although some distributors report an improvement in sales compared with the second half of 2012, there is still tremendous competition for orders, resulting in falling resale values. There is little new disruption from third country sources but trader stocks are still sufficient.

Source:
MEPS - European Steel Review

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