MEPS FORECASTS MODEST
STEEL PRICE UPTURN LATER THIS YEAR
EU steel prices hit a 39 month low in June. MEPS believes that the
low point of this cycle will occur over the next few months. Price
cutting has failed to lift selling volumes. Extended plant closures
are anticipated over the summer holiday.
Government austerity measures in most EU countries are adversely
affecting construction and manufacturing, with steel consumption
suffering as a result. Consequently, demand from industrial sectors
in Europe is not sufficient to support today's output. Capacity
reductions are necessary to restore the supply/demand balance.
However, steelmakers do not seem ready to take the plunge, as yet.
Unless output does fall, customers envisage further price decreases
during the summer, when demand will decline even more due to the
seasonal holidays in Europe and Ramadan in the Middle and Far East.
Moreover, diminishing raw material costs are not supporting steel
The German market is weak with too few orders. Despite efforts by
the mills to stabilise basis values, there is downward pressure and
some buyers anticipate another decrease of €10/15 per tonne when
third quarter negotiations get underway. Both service centres and
end-users are keeping inventories low. There is a great deal of very
tough competition in the distribution sector in some parts of the
country as they try to offload stock. This has led to a squeeze on
resale profit margins.
The French market remains very quiet. End-users continue to have
light order books and there is no evidence that this will change
soon. As a result, there are few purchases from the service centres,
which are reluctant to rebuild stocks. Mills are eager to stop
prices from decreasing but there is a lot of pressure from the
distributor side and basis values have come down again in June.
The market in Italy is depressed with no recovery expected in the
near term. Inventories are being kept at minimum levels because
consumption is so weak. All buyers, both at service centres and
end-users, are extremely cautious and just purchasing enough
material to survive. They are keeping any deals as small as
possible. Consequently, traders are finding business opportunities
difficult because they are required to order large tonnages from
In the UK, inventories are low at all customers. Third country
material is available from traders' stocks but very little new
business is being booked as the market is already oversupplied.
There is still tremendous competition between distributors for
orders, resulting in low resale values.
Demand is extremely low in Spain, especially from the distribution
sector. European mills have tried desperately to hold on to prices
but have finally conceded further decreases, although very little
business is being conducted, even at the reduced figures. Resale
values are no longer profitable according to a number of
Source: MEPS -
European Steel Review
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