EU STEEL PRICE RECOVERY CONTINUES IN MAY - FURTHER RISES ANTICIPATED - MEPS
According to MEPS, An absence of
competitively-priced third country import offers enabled European
flat product producers to target and secure significant increases,
in May. They seized this window of opportunity to try to rectify
their huge loss-making situation, which was not sustainable. Over
the last month, supply tightness became more acute by the day.
Buyers, although amazed by the scale and speed of the price
increases, still believe that some short-term potential to support a
further hike exists in the market. However, they expect prices to
peak in the autumn. The ongoing upward trend in Chinese export
prices has gone into reverse, in recent days. If this continues, it
could create negative pressure in Europe, later in the year.
German demand is relatively stable, at present, although exports of
manufactured goods to Asia and the Middle East weakened. The auto
market continues to flourish, with widespread discounting bolstering
sales. EU steelmakers continued to ramp up basis values for strip
mill products, aided by a lack of any outside competition. Supply on
the spot market is constrained and, in some cases, inadequate.
However, the larger service centres, having restocked over the last
few months, will probably have sufficient material to see them
through the summer.
French basis numbers increased very quickly, due to a dearth of
imports. Distributors tried to secure tonnages before further rises
but certain products are difficult to obtain. Meanwhile, downstream
activity remained at a similar level to the first quarter.
Nonetheless, end-users started to place orders as they realised that
resale values were also moving up.
Italian values strengthened significantly on a lack of import offers
and local output issues. The upward movement has been rapid, in May.
Quotations from China, Iran and India were far too expensive to
interest buyers. Domestic mill delivery lead times lengthened from
two to three months. Some customers, concerned that they may not get
material in time, are trying to buy more than normal. However, real
demand has changed very little. Auto demand is ticking over but is
described as ‘not exciting’. Any improvement in building activity is
only seasonal. Service centres report that a very large proportion
of their customers are not resisting higher resale values.
Price rises have been particularly dramatic, in the UK. Suppliers
and buyers feel that another increase of £20 per tonne is possible.
Sourcing has proved difficult. Some mainland European mills have
reduced allocations to UK customers. Distributors report that sales
are good. They can obtain resale prices based on their replacement
costs plus profit.
Positive price momentum has continued in Belgium. Mill delivery lead
times are long. A number of buyers, both stockholders and end-users,
are purchasing more than they need immediately, anticipating further
increases in the future. Others report they have been unable to
secure sufficient quantities.
The sharp decrease in competitively-priced import offers has led to
further rapid advances in the Spanish flat products market. Buyers
have started to examine import opportunities for September/October
delivery now that local selling values have become so high. However,
competitive offers are difficult to locate. Most domestic deliveries
are now into August/September. Demand is stable at an acceptable
level. Distributors’ inventories have been rebuilt and may even be
on the high side, at present. Therefore, many service centres do not
need to re-order any large quantities immediately.
Source: MEPS -
European Steel Review
- May 2016 Issue
MEPS - EU Steel
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