EU Steel Prices Decline
due to High Inventories and Import Pressure
Flat product price weakness persists in both
the north and south of Europe, according to MEPS. Spot business is
slow amidst a reluctance to commit to forward transactions for third
quarter business. Inventories at distributors and OEMs remain
relatively high. Large volume orders were placed at the turn of the
year, in anticipation of price rises. The material has now been
delivered or, in some instances, is still arriving, inflating
already bloated stocks. Import offers are competitively priced.
Quotations by overseas suppliers are made more attractive by the
strength of the euro against the US dollar.
The supply situation has eased, for most strip mill products, in
Germany. Underlying steel consumption is robust, despite the
approach of the summer holiday season. Nevertheless, due to high
inventories, particularly at the service centres, buyers are very
careful when placing forward orders. Standard grades and sizes are
on offer from suppliers in India, Taiwan, Vietnam, South Korea and
Russia. Quotations are at more competitive prices than in May
because of the weak US dollar exchange rate. The domestic price
trend is negative.
After a good first quarter, French distributors report slightly
softer conditions in the second trimester. Prices continue to be
under negative pressure. Supply chain participants are hopeful that
business will start to pick up in the short term. End-users are
beginning to refill their order books, as a number of projects
receive approval. Large buyers have started to purchase material,
anticipating mill closures in August.
Growth in Italian manufacturing output slowed slightly, in May.
Steel demand is stagnant and the market remains fragile. The only
sectors performing well are automotive and mechanical engineering.
MEPS notes that third country imports from India, Turkey, Vietnam
and China are widely available at attractive prices. At the moment,
stocks are plentiful at distributors and end-users, causing
customers to purchase only to fill any gaps in inventories.
Re-ordering for the autumn is unlikely to take place until just
before the August holidays commence. Customers are demanding
discounts, leading to depressed resale values and poor profit
margins for the service centres. Ex-works strip mill product figures
continue to contract.
In the UK, the weakness of the pound sterling is helping exporters
of manufactured goods, although new investment is hindered by the
upcoming Brexit negotiations. A number of negative price corrections
were noted for strip mill product sales, in June. As resale values
at the service centres weaken, buyers are, once again, considering
the purchase of overseas material, particularly from suppliers in
India and Vietnam. Currently, this is much cheaper than the European
equivalent, partly because of exchange rate movements. Demand on
distributors remains reasonable, although the market has become
quiet over the last few weeks. Inventories are at a higher level
than normal. Resale values are under downward pressure as a number
of distributors liquidate stocks, accumulated when prices were much
lower than today.
Despite reluctance on the part of European sellers, negative price
movement continues in the Belgian market for third quarter
deliveries. Demand on the service centres improved, recently, but
remains modest. Stocks are plentiful, enabling buyers to postpone
major purchasing decisions, for now. They only order the small
quantities that they need before the approaching holiday month of
Import offer prices into Spain decreased when the US dollar
weakened. So far, few deals have been concluded as buyers anticipate
more concessions, in the future. Moreover, the market is
overstocked. Service centres will need new material for
September/October, after the holidays. European suppliers are
slashing their quotations accordingly, as order intake slows.
Despite satisfactory levels of real consumption from a growing
manufacturing sector, end-users continue to ask distributors for
discounts. Service centres complain that resale values are falling
more quickly than mill prices.
Source: MEPS -
European Steel Review
- June 2017 Issue
All Products Composite Purchasing Price & Index
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