NO EU STEEL PRICE RECOVERY UNTIL 2016
European steel prices have
continued to trend downwards over the last twelve months. The MEPS -
EU Average All Products Composite Price is currently 5 percent below
the figure recorded in August 2014. Steel selling values now stand
at a five-and-a-half-year low.
Our analysis indicates that the differential between steel prices
and mill input expenditure, in euro terms, is broadly similar to a
year ago. Substantial decreases have been witnessed in the cost of
US dollar denominated raw materials, such as iron ore, coking coal
and ferrous scrap. However, due to currency exchange rate movements,
the reduction has not been as pronounced when converted into euros.
There have been mixed fortunes for the region’s steelmakers. A
number of mills, including ThyssenKrupp, Salzgitter and Voestalpine,
have recently announced positive second quarter financial results,
mainly based on the implementation of restructuring programmes. In
contrast, earnings have deteriorated at Tata Steel’s European
division. The company has cited the influx of cheap imports,
uncompetitive energy costs in the UK and the strength of sterling as
the reasons for the poor performance.
Demand from most steel consuming sectors is projected to expand this
year, with automotive being the stand-out performer. We believe that
apparent consumption will rise by approximately 2 percent, compared
with 2014. Improving consumer sentiment, low oil prices and the
depreciation of the euro are supporting growth.
Steel production, in the EU, has been relatively flat in the first
half of this year. In contrast, imports have expanded. The inflow of
foreign flat and long finished steel products increased, in
January/April 2015, by 7 percent, year-on-year. This follows a rise
of more than 20 percent in the previous twelve month period.
Conditions are very quiet in the European steel market, at present,
due to the summer shutdowns. We do not expect that any post-holiday
restocking will result in an increase in steel transaction values.
In fact, we forecast them to remain under negative pressure in the
coming months. Import prices continue to fall and domestic mills may
be forced to cut their selling figures in order to compete.
The recent devaluation of the Chinese renminbi is likely to result
in even lower import offers into Europe. Material of CIS origin will
remain a prominent feature of the market. Furthermore, producers in
countries such as Brazil and South Korea are attempting to boost
sales in the region.
The heightened import threat, coupled with low raw material costs,
is expected to result in steel price decreases for the remainder of
Source: MEPS -
European Steel Review
- August 2015 Issue
MEPS - EU Steel
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